Top economists Tuesday downplayed the impact of the Fitch rating agency’s latest assessment of Saudi Arabia’s economic strength.
The Saudi stock market ended 1.46 percent higher despite Fitch’s move.
Crude prices, meanwhile, rose on Tuesday to bring gains over the past three sessions to more than 10 percent.
“Saudi Arabia is taking fundamental steps to fiscally consolidate, optimize and rationalize expenditures, and more critically restructure its dependence on oil revenues,” John Sfakianakis, director of economic research at Gulf Research Center, told Arab News.
His remarks came as Saudi Arabia’s credit worthiness was downgraded by Fitch Ratings after the plunge in oil prices.
The rating was lowered one level to AA-, the fourth-highest investment grade, Fitch said.
Sfakianakis said: ”The Saudi economy is being transformed and it will become evident and explicit going forward. All these transformative activities will add to the macro picture which is being positively charged by higher oil prices which have surged by more than 50 percent from their recent lows.”
A regional analyst, who requested anonymity, asserted that the Saudi position is strong and the interest in funding is likely to be keen.
“A lot of these decisions are driven by oil price assumptions. The main thing they will be looking for is greater clarity on the fiscal strategy (steps toward greater resilience and sustainability) and well as measures to foster growth. At the end of the day, a lot of the calculus is about debt-to-GDP ratios, which will look better if growth is strong,” he told Arab News.
London-based James Reeve, deputy chief economist and assistant general manager, Samba Financial Group, said: “Fitch acknowledges that there has been better-than-anticipated fiscal adjustment, but there will still be sizable fiscal deficits this year and next. More could be done to improve the business environment.”
According to the International Monetary Fund (IMF), Saudi Arabia's economy grew by 3.4 percent last year. On Tuesday, the IMF maintained its forecast of 1.2 percent growth for the Kingdom this year and 1.9 percent in 2017.
Other analysts see 1.5 percent expansion in the Saudi economy this year.
The Tadawul All-Share Index surged 1.46 percent to 6,403.6 points on Tuesday.
Source: Arab News