U.S. ratings agency Fitch has downgraded Saudi Arabia and kept its outlook on the oil-producing country as negative as the low price of oil continues to take its toll.
In a note issued Tuesday, Fitch dropped its credit rating from AA to AA-, warning that the low price of oil, which the ratings agency expects to continue for some time, will have "major negative implications for Saudi Arabia's fiscal and external balances."
Saudi Arabia is one of the world's largest oil exporters and, with much of its wealth and government budget dependent on oil revenues, it has been sorely hit by a plunge in oil prices over the last few years – from $114 a barrel in June 2014 to currently around $43 a barrel of benchmark Brent crude.
Last month, ratings agency Moody's forecast real gross domestic product growth to slow to 1.5 percent for 2016 and 2 percent for 2017 in Saudi Arabia – well below the 3.4 percent growth of 2015 – and for average oil prices to stay at $33 a barrel in 2016 and $38 in 2017.
The re-rating comes ahead of a meeting of the 13 members of the oil exporting cartel with other non-OPEC members in Doha this weekend in the hope of freezing oil production to help stabilize the price of the commodity.
Fitch added that it considered the geopolitical risks facing Saudi Arabia higher than its fellow AA- countries.
"Tensions have risen between Saudi Arabia and its long-standing regional rival Iran, and are expected to persist, although a direct confrontation is highly unlikely. Saudi Arabia's military intervention in Yemen and in Syria shows a greater assertiveness in foreign policy, " it wrote.