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Fitch downgrades Saudi Arabia amid risk of further attacks on oil facilities

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Fitch downgrades Saudi Arabia amid risk of further attacks on oil facilities

Fitch Ratings downgraded Saudi Arabia's long-term foreign currency issuer default rating to A from A+ with a stable outlook, citing rising geopolitical tensions in the Gulf region following recent drone attacks on the country's oil infrastructure that had been blamed on neighboring Iran.

While Saudi Arabia is expected to fully restore its oil production by the end of September, Fitch warned that the country is at risk of further attacks that could damage its economy.

Fitch noted that Saudi Arabia's vulnerability to geopolitical tensions is partly due to its close policy alignment with the U.S., which has been ramping up pressure on Iran through sanctions since May 2018 when it withdrew from an international deal intended to curb Tehran's nuclear program.

"We see a risk that the U.S. and Saudi Arabia could be drawn into a deeper conflict with Iran," the rating agency said.

In downgrading the ratings, Fitch also cited Saudi Arabia's continued fiscal deficits and weakening balance sheet. The country's fiscal deficit was projected to rise to 6.7% of GDP in 2019 from 5.9% in 2018, while general government debt was forecast to climb to 26% of GDP in 2021 from 16% in 2018 and 14% in 2017.

Separately, S&P Global Ratings on Sept. 27 affirmed Saudi Arabia's unsolicited long- and short-term sovereign credit ratings at A-/A-2. The outlook is stable, reflecting the agency's expectation that oil production facilities damaged by the drone attacks will be quickly repaired, and that the country will maintain a moderate pace of economic growth over the next two years.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.