Despite the disruptions stemming from the ongoing Iran war, Saudi Arabia’s economy has remained resilient due to positive factors like sizeable fiscal buffers, including government deposits and other public-sector assets, that have continued to support the kingdom’s credit profile.
Fitch, which has maintained its favourable rating for the Kingdom, still flagged the Gulf major’s dependence on oil and governance indicators as the nation’s “relative weaknesses”.
As per the ratings agency, Saudi Arabia’s economy and public finances had proved resilient despite the ongoing geopolitical volatilities in the Middle East region.
While a ceasefire and the reopening of the Strait of Hormuz eased immediate risks, renewed tensions over Iran’s nuclear programme will remain as the steady problem area that may trigger periodic military actions between Washington and Tehran.
Fitch expects Brent crude prices to average USD 60 a barrel in 2028, down from USD 87 in 2026, as oil markets return to oversupply following the reopening of the Strait of Hormuz. However, the flare-up in tensions between the United States and Iran over the weekend has resulted in the oil prices surging by more than 2%.
As of now, Brent crude futures have gone up USD 1.67, or 2.2%, to USD 77.68, while US West Texas Intermediate crude was up USD 1.59, or 2.23%, to USD 73.00 a barrel.
As per the credit rating agency’s forecasts, Saudi Arabia’s economy is to grow 0.6% in 2026, reflecting trade disruptions due to the Hormuz tensions, before rebounding in 2027 as oil exports and petrochemical production recover.
“Growth is expected to moderate to 2.9% in 2028, supported by an economy-based rollout of giga-projects and continued domestic investment by the Public Investment Fund (PIF), partly offset by lower government capital spending and slower credit growth,” Fitch noted further.
Fitch also expects the kingdom’s fiscal deficit to narrow in 2026 as higher oil prices offset lower production volumes before widening to 4.7% of GDP in 2027 as prices decline. Lower capital expenditure and reduced war-related spending should help the Gulf major narrow the deficit again in 2028.
“The government debt is set to rise to 41.3% of GDP by end-2028, from 31.8% at end-2025, although this remains well below the median for similarly rated sovereigns. Borrowing by government-related entities would continue to increase but remain manageable. The agency also expects Saudi Arabia’s external position to remain strong, with foreign exchange reserves equivalent to about 11.6 months of current external payments in 2026. Sovereign net foreign assets are forecast to remain a key credit strength despite higher borrowing,” Fitch said further.
“A small current account surplus will be seen in 2026 on stronger oil export revenues before a return to deficit by 2028 as lower oil prices and robust domestic demand increase imports. Saudi banks remain resilient, with non-performing loans at 1.1% and a Tier 1 capital ratio of 19.2% at the end of the first quarter. The agency will maintain a neutral outlook for the banking sector despite a deteriorating regional outlook,” it noted.
However, Fitch sees its rating for the Kingdom potentially coming under pressure if public finances weaken materially, government debt continues to rise, or regional security deteriorates significantly enough to disrupt oil exports.
“Conversely, stronger fiscal reforms, sustained higher oil prices or continued diversification of the non-oil economy could support a future upgrade,” the agency concluded.