S&P cuts credit ratings of Saudi Arabia, other oil exporters

Standard & Poor’s downgraded Saudi Arabia, Bahrain, and Oman on Wednesday, in its second mass cut of large oil exporting nations in almost a year.

Saudi Arabia’s sovereign credit rating was cut by two levels from A+/A-1 to A-/A-2, with a stable outlook.

S&P said it expects the government to enforce measures to prevent further deterioration in the country's fiscal position.

“We now expect that Saudi Arabia's growth in real per capita GDP will fall below that of peers and project that the annual average increase in the government's debt burden could exceed 7 percent of GDP in 2016-2019,” it added.

Saudi Arabia’s net asset position, however, could decrease to 79 percent of GDP in 2019.

The agency forecast Saudi Arabia’s real GDP growth between 2016 and 2019 to average at 2 percent– down from 3 percent forecast in October 2015.

“Against the backdrop of a more than 40 percent drop in government revenues, an A- rating is good and still leaves Saudi Arabia as investment grade,” Jason Tuvey, Middle East economist at Capital Economics said in a note.

The ratings agency slashed Oman’s sovereign credit rating by two notches to BBB-, while Bahrain was downgraded from BBB- to BB. The impact of low oil prices will be “particularly acute” in Bahrain, S&P added.