Breaking News
Investing Pro 0
🙌 It's Here: the Only Stock Screener You'll Ever Need Get Started

Fitch cuts Saudi credit rating citing 'risk of further attacks'

Published Sep 30, 2019 10:22AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio

By Davide Barbuscia

DUBAI (Reuters) - Rating agency Fitch downgraded Saudi Arabia's credit rating to A from A+ on Monday, citing rising geopolitical and military tensions in the Gulf following an attack on its oil facilities and a deterioration of the kingdom’s fiscal position.

The Saudi finance ministry said it was disappointed by the "swift" downgrade and urged Fitch to reconsider it, arguing the move did not reflect the kingdom's response to the Sept. 14 attack or its capacity to handle adversity.

The move – which places Saudi Arabia one notch above the assessment of peer rating agency S&P Global – is a blow to the largest Arab economy as it seeks investment to diversify away from oil and prepares a potential international sale of U.S. dollar denominated Islamic bonds.

It follows an unprecedented attack on Saudi oil plants which initially halved the crude output of the world's largest oil exporter. Riyadh blamed adversary Iran, a charge Tehran denies.

"In our view, Saudi Arabia is vulnerable to escalating geopolitical tensions given its prominent foreign policy stance, including its close alignment with U.S. policy on Iran and its continued involvement in the Yemen war," Fitch said on Monday.

It saw a risk that the United States and Saudi Arabia could be drawn into a deeper conflict with Iran or its allies.

"Although oil production was restored fully by end-September, we believe that there is a risk of further attacks on Saudi Arabia, which could result in economic damage."

The finance ministry said the kingdom had shown "restraint and careful consideration" in its response and had acted immediately and effectively to maintain global oil supplies.

Saudi officials have said the Sept. 14 strike would not affect state finances or growth, but investors and analysts said it could have a long-term impact on ambitious plans to diversify the Saudi economy and attract foreign capital.

"We have revised our assessment of the vulnerability of Saudi Arabia's economic infrastructure to regional military threats as a result of the most recent attack," Fitch said.

Fitch is the first agency to change Riyadh's credit rating -- used by investors to assess the risk associated with a debt issuer -- since the attacks, the most dramatic of several incidents this year raising Iranian-Saudi tensions.

S&P Global Ratings last week affirmed its A-(minus) rating, saying however that its rating could come under downward pressure should Saudi oil infrastructure be attacked repeatedly.


Fitch said it was forecasting a widening of the Saudi fiscal deficit to 6.7% of GDP from last year's 5.9%, due to a loosening of fiscal policy and lower average oil prices and production.

The finance ministry said the deficit was "well within the parameters" it had set for the 2019 budget and that financial assets "substantially exceed" liabilities.

Ratings agency Moody's cut its 2019 forecast for Saudi economic growth to 0.3% from 1.5% after the attacks, though said it was largely due to an overall decline in oil production.

Fitch's downgrade comes ahead of a planned issue of international Islamic bonds by the kingdom, and the rating move could potentially affect the cost of Saudi Arabia's debt issue.

"The dollar sukuk would be a good test to see if pricing has been impacted, albeit slightly given that S&P last week kept its rating untouched," sad John Sfakianakis, chief economist at Gulf Research Center.

The downgrade also comes as state oil giant Aramco presses on with its initial public offering (IPO) plans, a pillar of Crown Prince Mohammed bin Salman's diversification drive.

Dollar-denominated bonds issued by the Saudi government didn't move much in the wake of the downgrade. The 2047 issue was down 0.5 cent at 113.50 cents in the dollar, according to Tradeweb data, little changed from earlier in the trading session. The 2046 issue was 0.3 cent lower at 111.55 cents in the dollar.

"People are focusing on the returns and how low the debt is and the fact foreign assets are large," said Giyas Gokkent, of JPMorgan (NYSE:JPM) Securities, when asked why there hadn't been a large bond market reaction.

"In an environment where the Fed is easing there's appetite among investors for strong names in the Gulf of which Saudi Arabia is one.”

Fitch rated Aramco A+ in April, when the company for the first time disclosed its finances before an inaugural bond issue. The rating agency said at the time it put Saudi Aramco's "standalone credit profile (at) ‘AA+’", adding that its rating was "capped by that of Saudi Arabia in view of strong linkage between the state and the sovereign."

Fitch cuts Saudi credit rating citing 'risk of further attacks'

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your profile, will be public on and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Andrew carson
Andrew carson Sep 30, 2019 9:22AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
But they fixed everything before lunch that day. Lol.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email