Saudi reform progress, not oil prices, to determine rating: Moody’s

The progress of Saudi Arabia’s reform program will be the criteria on which the future sovereign rating will be determined, and not oil revenues, rating agency Moody’s told Arab News Thursday.

“A simple reversion to oil price strength” would not result in an automatic strengthening of Saudi Arabia’s or any other GCC state’s sovereign ratings, said Alastair Wilson, Moody’s Managing Director of Global Sovereign Ratings.

The Kingdom and region’s “structural weakness” based on oil revenue dependence needs to be corrected, he added, noting that successful implementation of Saudi Arabia’s reform plans over the next 10-12 years would be “challenging” but not impossible.

Moody’s will consider several factors before revising Saudi Arabia’s ratings, including the success of economic diversification measures to insulate the economy from oil price shocks.

An important indicator of a more robut fiscal position is the non-oil balance sheet, Wilson added.

“The non-oil fiscal deficit in most of these (GCC) countries is very high. We expect to see this coming down. We would expect to see lower volatility in economic growth over a period of time, say during a five, 10 or 15-year period,” he said.