Fitch Ratings has affirmed Saudi Arabia's 'A+' sovereign credit rating with a stable outlook, highlighting the Kingdom's robust fiscal buffers and external financial position despite ongoing regional conflicts and temporary trade disruptions. The ratings agency noted that Saudi Arabia's government debt and sovereign net foreign assets remain significantly stronger than those of similarly rated peers, supported by substantial fiscal buffers including deposits and other public sector assets. However, oil dependence and governance indicators continue to constrain the rating.
Resilience Amid Regional Tensions
The affirmation follows a period of heightened regional tensions that disrupted shipping through the Strait of Hormuz. Fitch concluded that Saudi Arabia's economy and public finances remained resilient despite the conflict. “The rating reflects strong fiscal and external balance sheets, with government debt/GDP and sovereign net foreign assets considerably stronger than the ‘A’ and ‘AA’ medians, and significant fiscal buffers in the form of deposits and other public sector assets,” Fitch stated in its report. The agency added that “the economy and public finances have been resilient to the US-Iran war,” despite elevated geopolitical risks across the region.
Angus Blair, CEO of Signet, told Arab News the affirmation reflects Saudi Arabia’s swift response to the regional conflict earlier this year, as well as its ability to recalibrate government spending while maintaining the momentum of Vision 2030. “The affirmation by Fitch of the Saudi Arabian ratings is a reflection of the fast Saudi reaction to the USA/Iran/Israel kinetic action earlier this year and the recalibration of government spending through its ministries and other arms,” he said.
GDP Growth and Trade Disruptions
Fitch expects Saudi Arabia’s real GDP growth to slow to 0.6 percent in 2026 due to trade disruptions caused by the temporary closure of the Strait of Hormuz. The agency said oil exports continued via the Kingdom’s East-West pipeline during the conflict, while non-oil growth was affected by disruptions to petrochemical exports. Consumer spending, however, remained resilient, and business confidence is recovering. The ratings agency expects growth to rebound in 2027 as shipping flows normalize, allowing higher oil and petrochemical production.
Fitch noted that the phased delivery of giga-projects, continued Public Investment Fund spending under its new five-year plan, and major upcoming events will underpin economic activity, although lower government capital expenditure, project recalibration, and slower credit growth are expected to moderate the pace of expansion.
Expert Perspectives on Economic Resilience
Abdullah Almeer, assistant professor of economics at KFUPM Business School, told Arab News the affirmation reflects the Kingdom’s ability to balance near-term geopolitical challenges with longer-term structural reforms. “The Saudi economy exhibits a complex structure of resilience and strategic strength, balancing the ongoing non-oil diversification agenda under Vision 2030 with efforts led by the Public Investment Fund and the government to reduce the hydrocarbon-dependent fiscal framework,” he said.
Fitch projects the fiscal deficit to narrow this year as higher oil prices offset lower production volumes before widening to 4.7 percent of GDP in 2027 as oil prices ease. Government debt is forecast to rise to 41.3 percent of GDP by the end of 2028 from 31.8 percent at the end of 2025. Even so, the agency said the ratio would remain well below the projected median for similarly rated sovereigns. Blair said the government's focus has increasingly shifted toward encouraging domestic investment to support near-term economic growth while keeping the Kingdom's long-term economic transformation on track.
External Position and Banking Sector Strength
Saudi Arabia’s external position also remains a key credit strength, according to Fitch. The agency projects foreign exchange reserves to remain broadly stable at the equivalent of 11.6 months of current external payments this year, while sovereign net foreign assets are expected to stay significantly above peer levels despite increased borrowing. Fitch also said the Kingdom’s banking sector remained resilient throughout the regional conflict without requiring central bank support. At the end of the first quarter, non-performing loans stood at 1.1 percent while the Tier 1 capital ratio reached 19.2 percent, both improving from their levels at the end of 2024.
Almeer said Saudi Arabia’s banking sector remains a key pillar of that resilience, with total banking assets reaching approximately SR4.9 trillion ($1.30 trillion), supported by strong capitalization and a positive outlook. He said the temporary slowdown in growth projected by Fitch should be viewed in the context of the disruptions caused by regional tensions rather than as a sign of weakening economic fundamentals. He noted that while the closure of the Strait of Hormuz weighed on non-oil activity by disrupting petrochemical exports, domestic demand remained resilient, helping sustain business confidence. “Despite the near slowdown, the medium run remains positive after normalizing maritime traffic, which will support oil and petrochemical exports,” he said.
Outlook and Future Considerations
Blair said Saudi Arabia’s ability to redirect more oil exports through the Red Sea helped underpin government revenues and enabled the Kingdom to weather the regional political situation better than many of its neighboring states. Almeer added that recent economic indicators point to continued momentum in the non-oil economy, highlighting that the Industrial Production Index rose 3.2 percent month on month in May, while the Purchasing Managers’ Index reached 53.3 in June, signaling continued expansion in the non-oil private sector. He said growth over 2027 and 2028 is also expected to be supported by projects led by the Public Investment Fund.
The latest assessment follows other positive actions by major credit rating agencies this year. In May, Moody’s affirmed the Kingdom’s sovereign credit rating at “Aa3” with a stable outlook, citing the country’s economic resilience, an expanding non-oil economy, and its resilience to regional geopolitical risks and trade disruptions. The latest decision also comes shortly after the International Monetary Fund upgraded its 2027 growth forecast for Saudi Arabia to 5.5 percent from 4.5 percent in April, saying the Kingdom is expected to be less affected by regional disruptions due to its diversified export infrastructure.
Looking ahead, Fitch said future upgrades could be supported by reforms that further reduce the budget’s dependence on oil price volatility, stronger non-oil revenue generation, sustained oil prices above its current forecasts, or continued economic reforms that deepen non-oil growth and reduce reliance on public spending. Conversely, the agency said a prolonged deterioration in the security environment, significant disruption to oil exports, a sustained weakening in public finances, or a sharp increase in government-related contingent liabilities could put downward pressure on Saudi Arabia’s sovereign rating.
