Standard & Poor’s, the rating agency, has cut Saudi Arabia’s credit rating again on Wednesday with the forecast of the nation’s current account deficit led by the plunging oil prices.
Saudi Arabia now has a credit rating of A-, two notches down from the previous A+ rating. In October, S&P has downgraded the nation’s rating by one notch from AA- to A+. The nation is now expected to have a current account deficit of 14% of its GDP in 2016, more than the 13% that the government forecasted, and a growth of real GDP per capita below that of its peers. Ranked as the largest exporter of crude oil, Saudi Arabia is highly vulnerable to the tumble in oil prices.
The cut on credit ratings has occurred right after the OPEC member nations Saudi Arabia, Russia, Venezuela and Qatar agreed on Tuesday to freeze oil production, in order to combat the slumping of oil prices. In a release on Wednesday, S&P expressed that the deal would not have a material impact on the agency’s oil prices outlook of $40/barrel on average in 2016, and the fiscal situation of the country remained a main concern.
Six Months Crude Oil Price
On the same day, the S&P also downgraded other top oil-exporters such as Kazakhstan, Oman and Brazil. A downgrade on debt rating makes it more expensive for sovereign debt issuers to borrow money.
Crude oil is trading at $30.98 as of this writing.