S&P Cuts Saudi Arabia’s 2026 Growth Forecast by 5.3 Points and Holds the Rating at A+
S&P Global Ratings affirmed Saudi Arabia’s long and short term foreign and local currency sovereign credit ratings at A+ and A-1 on 11 September 2026 with a stable outlook, and in the same release replaced the 4.4 percent growth it had forecast for the kingdom on 13 March with a contraction of 0.9 percent. That is a swing of 5.3 percentage points in under 6 months on our calculation, and the rating itself did not move.
What moved and what did not
The rating has been at A+ since S&P raised it from A on 14 March 2025, and it has now been affirmed there 2 times running, on 13 March 2026 and again on 11 September. The transfer and convertibility assessment stayed at AA- and senior unsecured debt stayed at A+.
The scorecard behind the rating did not move either. External strength and the debt burden both score 1, the strongest band on the 6 point scale. The institutional, economic and monetary assessments each score 3. Fiscal flexibility and performance scores 4, the weakest of the 6 components. Those scores produce an indicative rating of aa-, from which 1 notch is deducted because the fiscal and external assessments are judged to be in possible negative transition as debt issuance for Vision 2030 continues. Saudi Arabia therefore sits 1 notch below where the published scorecard alone would place it.
The oil arithmetic behind the contraction
S&P put Saudi oil sector activity, citing OPEC data, at an average of 6.9 million barrels a day between March and August, against a working assumption of about 10.1 million barrels a day for 2026 set out in March. Secondary reporting of the release is inconsistent on whether the 6.9 million figure denotes exports or production, and OPEC secondary source estimates for Saudi crude production in August alone have ranged from about 6.2 to 7.3 million barrels a day depending on the reporting source. On our calculation the gap between 6.9 and 10.1 million barrels a day is 3.2 million, but that gap is not being treated here as a confirmed production or export shortfall pending the underlying S&P text.
Brent averaged 97 dollars a barrel over the same March to August stretch against 73 dollars on 27 February, the day before the regional conflict began, a rise of 32.9 percent on our calculation. Higher prices offset a large part of whatever volume was affected, though the precise size of that offset cannot be measured without a confirmed volume series.
Export routing is the mechanism most often cited. The 1,200 kilometre pipeline running from Abqaiq in the east to the Red Sea port of Yanbu in the west normally moves roughly 7 million barrels a day, up from 5 million after a parallel gas line was converted to carry crude, and loading capacity at Yanbu has been enhanced. S&P’s 11 September release cites reports that the pipeline was attacked on 10 September. The Saudi Ministry of Energy confirmed the same day that the East-West Pipeline, running through the Riyadh and Madinah regions, was shut down as a precautionary measure after multiple attacks on the morning of 10 September that caused a number of injuries; no party has been officially named as responsible, and the ministry said further developments would be announced in due course. As of 12 September the pipeline remained shut, with no restoration announced. S&P further notes that Asia bound cargoes are now sailing west and around Africa, adding at least 2 weeks to voyages.
Second quarter GDP fell 4.8 percent year on year on flash estimates, described by S&P as the steepest since the pandemic, after growth of 3.0 percent in the first quarter. Oil activity dropped 24.7 percent while non-oil activity grew 0.6 percent and government activity 0.9 percent, neither enough to offset it. Growth is then forecast to rebound 8.2 percent in 2027 before settling at 3.3 percent in 2028 and 2029.
Compounded across 2026 and 2027, the new path delivers 7.2 percent of cumulative real growth against 8.1 percent under the March path, a gap of under 1 percentage point on our calculation. On those numbers the output is deferred rather than lost.
A deficit running well ahead of the budget
Over the first half the government ran a deficit of 160 billion riyals, about 42.7 billion dollars at the 3.75 peg, or about 97 percent of the 165 billion riyals budgeted for the whole of 2026. Revenue rose 6 percent year on year to 600 billion riyals, with oil revenue up 9 percent to 330 billion riyals, or about 55 percent of the total. Spending reached 760 billion riyals on a heavily front loaded execution. Aramco’s reported record average realised crude price of 108 dollars a barrel in the second quarter alone, 11.3 percent above the 6 month March to August Brent average on our calculation (the two windows are not identical), was not enough to close the gap.
Applying the full year deficit forecast of 5.8 percent of GDP to S&P’s forecast nominal GDP of 1,300.6 billion dollars for 2026, equivalent to 4,877.3 billion riyals at the peg, gives a 2026 deficit of about 75.4 billion dollars, or 283 billion riyals, on our calculation, roughly 72 percent more than the budget assumed. It also implies a second half deficit near 123 billion riyals, about 23 percent smaller than the first half. Net borrowing in the first half was 166 billion riyals, of which 47.3 billion riyals came from the domestic market and 49.2 billion riyals from international markets, with private placements making up the balance. Deficits are forecast to average 3.4 percent of GDP across 2027 to 2029.
The buffer that carries the rating
Foreign exchange reserves reached 497 billion dollars in the first quarter of 2026, their highest since early 2020, easing to 494 billion dollars in June. The current account returned to a surplus of 4.4 billion dollars in the first quarter as imports contracted alongside the disruption to Gulf shipping.
The asset position is the thing being spent. Net general government assets stood at 63.0 percent of GDP in 2025, are forecast below 50 percent in 2027, and reach 37.3 percent by 2029. That is an erosion of 25.7 percentage points of GDP over 4 years on our calculation. Gross debt rises from 28.0 percent of GDP to 37.2 percent over the same span, 9.2 percentage points on our calculation, while interest costs stay below 5 percent of revenue throughout. Sovereign wealth fund assets are put at about 3.4 trillion riyals.
The erosion is nonetheless shallower than S&P itself expected in March. That earlier forecast put 2029 net government assets at 33.1 percent of GDP and gross debt at 38.7 percent, 4.2 and 1.5 percentage points worse, respectively, than the path S&P now expects, even after cutting 2026 growth by 5.3 percentage points.
Banks tighten alongside. Lending growth is expected to slow to between 6 and 7 percent in 2026 from the 13 percent averaged in 2024 and 2025. Non-performing loans at the 10 largest Saudi banks are seen rising to about 1.5 percent by the end of 2026 from 1.1 percent in June, and the sector’s net external debt has reached 6.1 percent of domestic credit at the end of July from under 1.0 percent at the end of 2024. Inflation averaged about 1.8 percent through July, with housing rents decelerating to 4.3 percent from 5.2 percent in January under a rent freeze.
| Forecast | 13 March 2026 | 11 September 2026 | Change |
|---|---|---|---|
| Real GDP growth, 2026 | 4.4% | -0.9% | 5.3 pp lower |
| Real GDP growth, 2027 | 3.5% | 8.2% | 4.7 pp higher |
| Nominal GDP, 2026 | $1,370.7bn | $1,300.6bn | $70.1bn lower |
| Fiscal balance, 2026 | 5.5% deficit | 5.8% deficit | 0.3 pp wider |
| Usable reserves, 2026 | $318.5bn | $375.6bn | $57.1bn higher |
| Gross government debt, 2029 | 38.7% of GDP | 37.2% of GDP | 1.5 pp lower |
| Net government assets, 2029 | 33.1% of GDP | 37.3% of GDP | 4.2 pp higher |
S&P Global Ratings research updates on Saudi Arabia published 13 March 2026 and 11 September 2026. Change column on our calculation. pp denotes percentage points.
Why it matters: The affirmation says the rating is being carried by the balance sheet rather than by the economy. Saudi Arabia is now forecast to shrink in 2026 and still holds A+, and the reason is a net asset position that entered the period at 63.0 percent of GDP and is set to fall by 25.7 percentage points of GDP by 2029 on our calculation, while fiscal flexibility and performance already scores 4, the weakest of the 6 rating components. The kingdom is spending assets it will not rebuild quickly, and the 8.2 percent rebound the rating leans on requires the disrupted export routing behind the March to August oil figures to recover on schedule. The East-West Pipeline’s precautionary shutdown on 10 September, confirmed by the Ministry of Energy a day before the rating action, is the first direct test of that routing assumption since the affirmation.
Outlook: The outlook is stable. A downgrade would require the regional conflict to run significantly longer and harder, so that growth, fiscal and external metrics are materially damaged, or debt to accumulate sharply enough to weaken public finances and the external position. A positive action is possible within 2 years if the conflict subsides and reform and non-oil activity lift GDP per capita alongside improving fiscal and external metrics. The working assumption is that disruption continues into 2027 with regional oil flows below prewar levels, on a Brent path of 95 dollars a barrel for the rest of 2026, 80 dollars in 2027 and 65 dollars in 2028 and 2029.
Sources: S&P Global Ratings, Saudi Ministry of Finance, GASTAT, Saudi Central Bank, Saudi Aramco, Saudi Ministry of Energy, OPEC.
