Political Tension Heats Up in Saudi Arabia As Economy Downgraded

When Fitch cut Saudi Arabia’s credit rating on Tuesday, it cited the usual concerns: low oil prices and a widening government deficit.

That’s not terribly surprising — the world’s largest oil exporter has endured a slew of downgrades from ratings agencies in recent months.
But the Fitch analysis went beyond oil prices, including warnings tied to political uncertainty within the kingdom, and rising tensions in its volatile neighbourhood.

The credit ratings agency said that policymaking in the kingdom has been concentrated in the hands of Prince Mohamed bin Salman, who is the country’s defense minister and second in line to the throne.
That’s good because it has accelerated decision making. At the same time, Fitch said it has made policy less predictable.

Earlier this month, the deputy crown prince outlined bold plans to build a mega $2 trillion investment fund to help wean his country off its heavy reliance on oil. But Fitch said that it’s not clear whether the deputy crown prince has built a consensus around his initiatives.

“The degree of support for this accumulation of power from other parts of the royal family is uncertain,” Fitch said.

via CNN

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza