RIYADH-Ratings agency Standard & Poor’s (S&P) for the second time in four months downgraded Saudi Arabia’s debt rating.
S&P cut Saudi Arabia’s debt rating to ‘A-/A-2’ from ‘A+/A-1.’
Earlier, on October 30, the ratings agency cut the kingdom’s rating to ‘A+/A-1’ from ‘AA-/A-1+.’
A debt downgrade makes it more expensive for sovereign issuers to borrow money.
In a statement, S&P said that Russia, Venezuela, Saudi Arabia and Qatar would freeze production won’t impact the firm’s assumptions that oil prices will average $40 a barrel in 2016, and thus do little to improve Saudi Arabia’s fiscal standing.
The ratings agency notes that Saudi Arabia is currently prepared for a deficit of 13% in 2016, but the firm believes the kingdom’s budget assumptions are based on oil trading at $45 a barrel.
The first move out of Saudi Arabia to combat the decline in oil prices has fallen on deaf ears both in the market and the analyst community.
“The first market reaction to this news was a further decline in oil prices,” S&P wrote.
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