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Global Rating Agencies Expect Greater Growth for Saudi Economy

Moody's has updated Saudi Arabia's credit report to A1 with a stable outlook (Reuters)
Moody's has updated Saudi Arabia's credit report to A1 with a stable outlook (Reuters)
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Global Rating Agencies Expect Greater Growth for Saudi Economy

Moody's has updated Saudi Arabia's credit report to A1 with a stable outlook (Reuters)
Moody's has updated Saudi Arabia's credit report to A1 with a stable outlook (Reuters)

Global rating agencies have expected a greater growth for the Saudi economy.

Fitch and Moody's have affirmed Saudi Arabia's credit rating at A+ and A1 respectively, with a stable outlook.

This reflects the high level of confidence by global rating agencies in the Saudi economy on one hand, and the effectiveness of economic reforms taken by the Kingdom’s government on the other hand.

Credit ratings issued by global rating agencies provide important indicators for investors. Positive indicators prove the economy’s strength while demonstrating its vitality and effectiveness.

They commended the Kingdom’s non-oil revenue growth at 10.1 percent in 2018, which was driven by the Saudi financial reform program.

They noted that plans to diversify the Kingdom's economy away from oil are likely to contribute to the country's medium and long-term growth.

In this context, Saudi Arabia's Ministry of Finance has welcomed this rating.

Fitch Ratings maintained the Kingdom’s credit rating at A+ with a stable outlook on the back of the country’s financial strength, including foreign reserves, low public debt and large government assets.

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Saudi Transport, Logistics Sector Set for 10% Growth in Q2

An investor monitors a trading screen at the Saudi financial market in Riyadh. (AFP)
An investor monitors a trading screen at the Saudi financial market in Riyadh. (AFP)
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Saudi Transport, Logistics Sector Set for 10% Growth in Q2

An investor monitors a trading screen at the Saudi financial market in Riyadh. (AFP)
An investor monitors a trading screen at the Saudi financial market in Riyadh. (AFP)

As Saudi companies start reporting their Q2 financial results, experts are optimistic about the transport and logistics sector. They expect a 10% annual growth, with total net profits reaching around SAR 900 million ($240 million), driven by tourism and an economic corridor project.

In Q1, the seven listed transport and logistics companies in Saudi Arabia showed positive results, with combined profits increasing by 5.8% to SAR 818.7 million ($218 million) compared to the previous year.

Four companies reported profit growth, while three saw declines, including two with losses, according to Arbah Capital.

Al Rajhi Capital projects significant gains for Q2 compared to last year: Lumi Rental’s profits are expected to rise by 31% to SAR 65 million, SAL’s by 76% to SAR 192 million, and Theeb’s by 23% to SAR 37 million.

On the other hand, Aljazira Capital predicts a 13% decrease in Lumi Rental’s net profit to SAR 43 million, despite a 44% rise in revenue. This is due to higher operational costs post-IPO.

SAL’s annual profit is expected to grow by 76% to SAR 191.6 million, driven by a 29% increase in revenue and higher profit margins.

Aljazira Capital also expects a 2.8% drop in the sector’s net profit from Q1 due to lower profits for SAL and Seera, caused by reduced revenue and profit margins.

Mohammad Al Farraj, Head of Asset Management at Arbah Capital, told Asharq Al-Awsat that the sector’s continued profit growth is supported by seasonal factors like summer travel and higher demand for transport services.

He predicts Q2 profits will reach around SAR 900 million ($240 million), up 10% from Q1.

Al Farraj highlighted that the India-Middle East-Europe Economic Corridor (IMEC), linking India with the GCC and Europe, is expected to boost sector growth by improving trade and transport connections.

However, he warned that companies may still face challenges, including rising costs and workforce shortages.