Saudi Arabia's credit rating downgraded

NEW YORK

The credit rating of the world's largest oil exporter was downgraded because of low crude prices, Fitch announced Tuesday.

Saudi Arabia’s rating fell to AA- from AA, with a negative outlook, according to the ratings agency.

The decision by the ratings agency comes ahead of a meeting later this week in Qatar where Saudi Arabia, OPEC countries and Russia will discuss freezing crude production levels in an attempt to boost prices.

Fitch said a period of prolonged low oil prices through 2017 would have "major negative implications for Saudi Arabia's fiscal and external balances."

It added that the Kingdom's current-account balance recorded a deficit of 8.2 percent of GDP in 2015 and that figure is expected to worsen to 14 percent in 2016.

The rating agency believes the deficit-to-GDP ratio will "narrow only marginally" this year, stating that Saudi Arabia's deficit widened to 14.8 percent of GDP in 2015 after a deficit of 2.3 percent in 2014 due to the low oil price environment.

Fitch emphasized that Saudi reforms, as part of the country’s transformation program, could boost the Kingdom’s non-oil revenues while the government readjusts expenditures to make substantial savings.

Saudi Arabia's real GDP grew 3.4 percent in 2015, but Fitch anticipates this growth to slow to 1.5 percent in 2016 and to 1.7 percent in 2017.

"We expect oil output to stabilize and non-oil GDP to be hit by fiscal consolidation measures and weaker confidence," it said.