- Fitch Ratings downgraded Saudi Arabia’s credit rating on Monday due to concerns stemming from drone strikes on major oil production sites in early September.
- The credit-rating agency lowered Saudi Arabia’s long-term rating to “A” from “A+” over fears the country’s oil facilities might be vulnerable to attacks in the future.
- Fitch also said Saudi Arabia’s swelling fiscal deficit was a contributing factor to the downgrade.
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Fitch Ratings cut Saudi Arabia’s credit status on Monday over concerns the country’s oil facilities could be vulnerable to further attacks in the future.
The rating agency lowered Saudi Arabia’s long-term credit rating to “A” from “A+,” citing flaring geopolitical and military pressures in the Gulf Region following a series of drone strikes on key Saudi oil fields in early September. The US and Saudi intelligence communities have suggested Iran was responsible for the attacks.
“Saudi Arabia is vulnerable to escalating geopolitical tensions given its prominent foreign policy stance, including its close alignment with US policy on Iran and its continued involvement in the Yemen war,” Fitch said in a release. “We see a risk that the US and Saudi Arabia could be drawn into a deeper conflict with Iran.”
Despite the country’s ability to restore full-production capacity just a few weeks after the strikes, Fitch still believe future attacks could damage Saudi Arabia’s economic infrastructure.
Saudi Arabia’s growing fiscal deficit was also a contributing factor for the downgrade, the agency said. Fitch expects the deficit to grow to 6.7% of gross domestic product in 2019 – up from 5.9% last year – due to loosening fiscal policy and declining oil prices and production.
The Saudi Ministry of Finance quickly challenged Fitch’s rating on Monday saying it was disappointed by the downgrade.
“The event highlights Saudi Arabia’s outstanding capacity to effectively deal with adversities, commitment to maintaining stability in the global oil markets,” the ministry said in a press release. “The downgrade of the rating comes across as somewhat speculative without direct reference to the swift, decisive and effective response to the event.”
Saudi Crown Prince Mohammed bin Salman also said during an interview with CBS’ “60 Minutes,” that the dispute with Iran could threaten the global economy and “firm action” needed to be taken.
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