Fitch downgrades Saudi Arabia, doubts prospects of reform
Fitch Ratings cut its assessment of Saudi Arabia's credit quality by one notch to A+ with a stable outlook from AA- with a negative outlook, citing deterioration of state finances due to low oil prices and doubts over whether Riyadh can achieve its economic reform plans. While the leadership was strongly committed to diversifying the economy beyond oil, that intention might not be enough, Fitch said, adding that the scale of the reform agenda risks overwhelming the government's administrative capacity. Planned hikes in domestic energy prices to cut the government's subsidy burden could severely hurt energy-intensive industries, while higher fees for hiring foreign workers could undermine large parts of the private sector, Fitch said. In a statement responding to Fitch's move, Saudi Minister of Finance, Mohammed al-Jadaan, said the government's balance sheet is fundamentally strong and the economy has structurally aligned itself to a lower oil price, as reflected in a more sustainable balancing price for its fiscal and current accounts.
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