Saudi Arabia and other oil-producing nations saw a cut in credit ratings by Standard & Poor’s on Wednesday amid the collapse in crude oil prices, according to reports.
According to Forbes, Saudi Arabia is now rated A-, “a two notch downgrade from S&P’s previous rating of A+, [and] is forecast to have a current account deficit equivalent to 14% of gross domestic product in 2016, up 800 basis points from its October forecast.”
For Saudi Arabia, the cut by S&P is only the latest blow dealt by a substantial decrease in oil prices since the Summer of 2014.
“Were oil to stay near current prices, as S&P expects, it might cause Saudi Arabia to miss its deficit target by a wide mark,” writes Antoine Gara in Forbes. “After all, the hydrocarbon sector accounted for about 28% of nominal GDP in 2015, per S&P’s estimates. Prior to the collapse in oil prices, Saudi Arabia’s hydrocarbon sector comprised nearly 80% of GDP, underscoring the sensitivity of commodity prices to the country’s economic flows.”
This excellent report in Bloomberg features comments from analysts and brokers around the world about the impact and implications of the ratings cut.
