We expect the central government deficit to narrow only gradually, to 6.4% of GDP in 2019 (SAR180 billion), from 8.3% in 2017, as renewed growth in spending offsets sharp increases in both oil and non-oil revenue.

The US's withdrawal from the Iran nuclear deal is likely to further increase geopolitical risk in the Middle East. However, the full impact depends on the severity of US sanctions snapback and the responses from Iran, the other parties to the deal, and major regional powers.

Overall, we estimate that the Saudi Arabian money fund sector grew by around 10% over the three years to end-December 2017 in US dollar terms, with asset expansion particularly high in 2017. This compares with a global money fund growth of 5% over the same period.

The government has yet to identify a clear medium-term strategy to tackle high deficits and there is no clarity on a timeline towards the development of such a strategy. The government has continued to implement a number of measures to raise revenue and trim spending, including excise taxes at end-2017 and fuel price increases in January 2018. 

The downgrade of Arab Bank reflects its high lending growth in Jordan (23% in 2017, well above the sector average of about 8%), which we views as a challenging environment. This increased exposure to the Jordanian economic environment adds to an already high exposure to the Jordanian sovereign relative to the bank's equity via holdings of government securities. 

Saudi Arabia's attorney general said last week that the Kingdom would receive close to USD107 billion in settlements from some of the businessmen and officials detained by the new anti-corruption commission last November. Most of the individuals held have been released, but 56 remain in custody, the attorney general said. 

We have raised our estimate for Kuwait's fiscal surplus in FY18 (ending 31 March 2018) to 1.9% of GDP, from 0.2% previously. Recent data published by the Ministry of Finance indicates that Kuwait's budget was close to balance in the first nine months of FY18, with revenues at 84% of original budget allocations, but spending considerably lower, at 63%. 

Recent fiscal measures in Saudi Arabia will raise government revenues sustainably, but spending increases highlight that commitment to consolidation is constrained by the desire to support economic growth.

Oman's sovereign balance sheet strengths are dwindling. We forecast government debt will hit nearly 55% of GDP by end-2019, from 41% of GDP at end-2017 and just 13% of GDP at end-2015. 

Bahrain's ratings are supported by high GDP per capita and human development indicators (relative even to the BBB median), a developed financial sector and the boost to external financing flexibility from strong GCC support. 

To mark the occasion, Fitch hosted an event in Riyadh with participation from senior representatives from Tadawul, Jadwa Investment Company and JP Morgan. This follows authorization obtained from the Capital Market Authority (CMA) in April 2017 to conduct credit rating activities in the Kingdom of Saudi Arabia.
 

Created to fund projects with positive environmental benefits, green bonds have become rapidly popular. Islamic Finance is one of the latest sectors to begin exploring the possibilities of what has been called “socially responsible” investing. Fitch Ratings' Bashar Al Natoor, Global Head of Islamic Finance discusses. 

Appointment of Mr. Al-Behairi follows the recent announcement that Fitch Ratings has obtained authorization from the Capital Market Authority to conduct credit rating activities in the Kingdom of Saudi Arabia and is establishing an on-the-ground presence in Riyadh.