SAUDI ARABIA

RISK RATING
Elevated
Default High Risk Score 5.00
Normal Average 3.30
Weighted Average 2.60
RISK RATING HISTORY
RISK RATING SCALE

Risk Rating Scale

Severe: 8.0 to 10
High: 6.0 to 7.9
Elevated: 4.0 to 5.9
Moderate: 2.0 to 3.9
Low: 0.0 to 1.9
EXCHANGE RATE
Country Outlook

The Kingdom of Saudi Arabia faces an economic contraction of 5.4 percent in 2020, which is among the mildest drops in the Gulf region. The country tripled its value added tax to 15 percent in 2020 in response to the double blow of the pandemic and the collapse of the oil price. It has also rolled out an extended stimulus programme to help businesses recover from the effects of coronavirus. The absolute monarchy remains firmly in place, although the al-Saud family’s influence has been weakened by the 2017 purge instigated by the powerful crown prince. The government is seeking an exit strategy from its conflict in Yemen, which is a protracted stalemate that frequently threatens attacks on Saudi oil assets.

  • Crown Prince Mohammed bin Salman is the de facto leader of the kingdom ruled by his father King Salman. The war in Yemen since 2015, the blockade of Qatar since 2017, and the 2018 assassination of journalist Jamal Khashoggi have tainted the crown prince’s reputation. However, he has also led several successful reforms that restrict the powers of the religious police, remove the ban on female drivers, and weaken the male-guardianship system. His Vision 2030 programme aims to diversify the Saudi economy through investment in non-oil sectors including technology and tourism. Through the 2017 purge, MBS consolidated his authority and assumed several key roles such as defence minister and head of reform-minded bodies. There is speculation that he will succeed King Salman before the latter’s death.
  • The war in Yemen has become a military stalemate and Saudi Arabia is searching for an exit strategy. In retaliation for its offensive, Yemeni Houthis supported by Iran have staged several attacks on Saudi oil terminals and other infrastructure, especially facilities close to the border with Yemen that are within rocket or unmanned drone reach. Attacks are carried out by unmanned aerial vehicles and unmanned boats carrying explosives. The Houthis claimed responsibility for the September 2019 attacks on Saudi Aramco’s oil facilities that cut off 5 percent of daily global supply for weeks. The Saudis and the US blamed the attack on Iran. The Houthis have also threatened to target Saudi territory using ballistic missiles and drones.
  • Oil price volatility is likely to impact the Saudi economy well into 2021. The IMF forecasts the kingdom’s economy will shrink by at least 5.4 percent in 2020, but still estimates 3.1 percent growth in 2021. The Kingdom tripled its value added tax to 15 percent earlier this year in response to the double blow of the pandemic and the collapse of the oil price. In 2020, for the first time, the General Authority for Statistics published “flash estimates” for quarterly GDP performance to provide more timely data about the economy, which has been well-received by ratings agencies. Saudi Arabia has rolled out an extended stimulus programme to help businesses recover from the effects of coronavirus. This programme covers salaries for 70 per cent of Saudi employees in firms with more than five employees.
CUMULATIVE AND DAILY COVID-19 INFECTIONS AND DEATH RATE
INTERNATIONAL MONETARY FUND | DATAMAPPER
Risk Perils
Political Instability
1.5
Expropriation, Nationalisation, Confiscation & Deprivation
2.0
Contract Frustration & Breach
4.0
Taxation
4.0
Bribery & Corruption
5.0
Regulatory Burden
4.5
Strikes, Riots & Civil Commotion
2.5
Security
5.0
Sovereign Default
1.5
Economic Volatiliy
3.0

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