Upgrades from Moody's Saudi Arabia's grade for budgetary restraint and excellent diversification progress

Moody's Ratings , a leading global credit agency, has upgraded Saudi Arabia’s long-term local and foreign currency issuer and senior unsecured ratings from A1 to Aa3, acknowledging the Kingdom’s advancements in economic diversification. Additionally, the ratings for Saudi Arabia’s local and foreign currency medium-term note program have been raised to (P)Aa3 from (P)A1.

The agency highlighted that ongoing progress in diversification would gradually lessen Saudi Arabia’s dependence on oil markets and mitigate risks associated with the global transition to low-carbon energy.

穆迪分析 noted that the recalibration and prioritization of diversification initiatives, alongside regular reviews, would create a favorable environment for sustainable growth in the Kingdom’s non-hydrocarbon economy, helping to maintain the strength of its sovereign balance sheet.

Saudi Arabia’s non-hydrocarbon private sector GDP is projected to grow by 4% to 5% annually over the coming years, among the highest rates in the Gulf region. Moody’s attributes this growth to the Kingdom’s diversification strategy, which is expected to reduce reliance on oil markets and long-term carbon transition challenges.

穆迪分析 baseline forecast assumes no significant drop in oil prices or production in the near future and anticipates that heightened geopolitical tensions in the region will not escalate into a broader military conflict affecting Saudi Arabia’s oil exports or private sector investment.

The Kingdom has made significant investments to boost growth in the non-hydrocarbon private sector, including extensive capital expenditures and domestic investments by the Public Investment Fund (PIF) .

穆迪分析 estimates that combined government and Public Investment Fund (PIF) spending on projects and long-term investments will exceed 20% of non-hydrocarbon GDP. The agency also foresees strong private consumption growth, driven by the commercialization phases of large-scale initiatives, such as PIF’s giga projects, which aim to expand supply-side capacity in sectors like hospitality, leisure, retail, and dining.

While fiscal prudence and the recalibration of projects may affect the pace of non-hydrocarbon sector development, 穆迪分析 views the focus on macroeconomic and fiscal sustainability as a credit-positive factor.

Regularly reviewing and optimizing projects to enhance their economic impact and support the growth of a domestic industrial base and related ecosystems will enable Saudi Arabia’s non-hydrocarbon economy to develop more sustainably, the agency concluded.

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