S & P expects Saudi deficit to increase to 16% reduce rating to A+ 10-31
S & p expects the deficit to increase to 16% October 31, 2015 0
Reduced s & p sovereign ratings of Saudi's long-term foreign and domestic currencies to A + from AA-/A-1/A-1 + as returned by "significant negative shift" on fiscal balance.
S & p said it expects the deficit to increase to 16 percent of GDP in 2015 from 1.5 percent in 2014 while reflecting the sharp decline in crude oil prices.
In a statement, said "heavy reliance on hydrocarbon revenues and lack of current spending flexibility indicates weaknesses in public finances."
After years of steady growth in government spending to support high oil prices, the Saudi economy might face a more difficult period.
Many analysts expect slow growth in 2016 from its current rate of around three percent.
The Saudi Central Bank to liquidate the assets to cover the huge deficit in the State budget as a result of lower oil prices.
However, the pace of decline of net foreign assets of Saudi Arabia slowed earlier this year in part due to resume Government bond issue in July for the first time since 2007, which reduced the need to sell assets abroad.
And the pace of decline may see a further slowdown in coming months with Government austerity steps taken to curb spending and increase revenues from non-oil sources.
The IMF warned last week that the Kingdom will deplete the financial reserves in less than five years if financial policy remained unchanged.
And the standard & poor's has maintained a negative expectation regarding Saudi Arabia