Fitch Ratings has recently affirmed Saudi Arabia’s long-term foreign-currency issuer default rating at ‘A+’ with a stable outlook. The rating reflects the Kingdom’s strong fiscal and external balance sheets, with government debt/GDP and sovereign net foreign assets considerably stronger than both the ‘A’ and ‘AA’ medians, and significant fiscal buffers in the form of deposits and other public sector assets.
Oil dependence, World Bank governance indicators and vulnerability to geopolitical shocks have improved but remain weaknesses. Meanwhile, deep and broad social and economic reforms implemented under Vision 2030 are diversifying economic activity but at a meaningful cost to the balance sheets, said Fitch.
Headline GDP growth to rise to 4.3 percent in 2025
Fitch Ratings revealed that Saudi Arabia’s rating stands at ‘A+’ due to several factors, including its strong balance sheet and external finances.
The country’s reserves are forecast to remain large relative to peers’, equivalent to an average of 12.8 months of current external payments in 2025, easing to 11.3 months by 2027. Sovereign net foreign assets will remain a clear credit strength at 35.3 percent of GDP in 2027.
However, large external borrowing across the public and private sectors and a greater orientation toward domestic rather than external investment will continue the multiyear decline in the net external position and move the economy to a net external debtor of 3.4 percent of GDP by 2027.
“We forecast headline GDP growth to rise to 4.3 percent in 2025 and 4.7 percent in 2026 before slowing to 3.6 percent in 2027, driven by increases in oil production. Non-oil growth will remain buoyant, averaging 4.5 percent over the period, backed by reforms, capex and high spending by government-related entities. Higher oil output will benefit downstream processing industries,” said Fitch.
Saudi Arabia’s GDP has been rebased and re-estimated, with the level of 2024 headline GDP revised up by 14 percent, almost entirely due to a 28 percent increase in the non-oil private sector.
“Reforms and associated public and GRE funding under Vision 2030 continue to support diversification, with new reforms in 2025 including opening land ownership to non-Saudis and the implementation of a new investment law. Nonetheless, the resilience of non-oil growth to a period of lower government and GRE spending remains to be tested,” the report added.
Saudi Arabia’s banking sector remains strong
The Fitch report also notes that Saudi Arabia’s banking sector metrics remain strong. In Q1 2025, the capital adequacy ratio was 19.3 percent and non-performing loans 1.2 percent, the lowest since 2016.
Profitability remained high given robust credit growth and high net interest margins. The central bank has tightened macro-prudential policies in the face of rapid credit growth.
As credit growth continues to outpace deposit growth, banks continue to step up external borrowing, causing a rapid deterioration in the sector’s net foreign asset position, although it is small relative to total sector assets, at 2.7 percent.
Lower oil export revenues to impact current account deficit
On the other hand, Fitch expects Saudi Arabia’s current account deficit to reach 2.9 percent of GDP for 2025, reflecting lower oil export revenues. Brent is forecast at $70/b, down from $79.5/b in 2024. Overall exports will increase due to continued double-digit growth in non-oil exports, but this will be outpaced by the associated rise in imports of goods, services and labor.
The deficit will widen to 4.2 percent of GDP in 2026, reflecting Fitch’s forecast that oil prices will fall to $65/b and demand for imports and associated services and labor remain robust due to project execution. Greater domestic orientation of public funds and continued external borrowing will result in financial account surpluses that broadly offset the CAD.
Fitch also forecasts a budget deficit of 4 percent of GDP in 2025, driven by lower oil revenues reflecting lower oil prices and a significantly smaller dividend from Saudi Aramco. “We forecast a small deterioration in the deficit, to 4.1 percent, for 2026, in line with Fitch’s projection for lower oil prices. We expect the deficit to narrow to 3.6 percent in 2027 due to rising non-oil revenue, higher oil production and spending growth below nominal GDP growth,” it added.
