Saudi Arabia Country Risk Assessment

Saudi Arabia: risk assessment
Sovereign risk Currency risk Banking sector risk Political risk Economic structure risk Country risk
August 2010 BBB BBB BB B BBB BBB
Download in spreadsheet format

Sovereign risk

Stable. The sovereign’s creditworthiness is not in question, given its large stock of financial assets. The main constraint on the rating remains the dependence of the public finances on oil, which generates 80-90% of fiscal revenue.

Currency risk

Stable. Saudi Arabia and three neighbouring states are pressing ahead with monetary union. Rising inflation could lead to speculation about an adjustment to the peg, creating pressure on the currency. However, there are large inflows of international capital, the central bank remains committed to the currency peg and it holds around US$430bn in foreign currency and securities.

Banking sector risk

Stable. Banks remain well capitalised and profitable, and the risk of a systemic crisis appears low. Defaults by two major family firms have led to concerns over the solvency of other family businesses and to banks increasing provisions for bad loans, which could make private borrowing from abroad expensive despite the strong capital bases of banks and government guarantees of bank deposits.

Political risk

No threat to Al Saud rule is likely, but institutional effectiveness will remain very limited and corruption is pervasive.

Economic structure risk

Oil accounts for some 90% of exports and government revenue. As a result, the economy is vulnerable to shifts in world oil prices and domestic oil output.

SOURCE: Country Risk Service