First News
Volume:7, Number:39
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Business & Finance 4

Moody's Lifts Saudi Arabia's Banking System Outlook

Credit rating agency Moody's Investors Service has raised its outlook for Saudi Arabia's banking system to stable" from "negative", in a fresh sign that global investor confidence in the kingdom is recovering after plunging due to low oil prices. "Despite low oil prices, which we expect to fluctuate between USD40 and USD60 a barrel over the next 18 months, and cuts in oil production, the Saudi economy will gradually recover, supported by government spending, Moody's vice-president Olivier Panis said in a statement on March 23. Low oil prices have strained Saudi government finances, leading to a USD98 billion state budget deficit in 2015. This forced state spending cuts that slowed the economy, worsened loan quality and reduced banks' access to fresh deposits. In the last several months, however, pressures have eased. The government replenished its coffers with a USD17.5 billion international bond issue in October and announced progress in cutting its deficit, while Brent crude oil rebounded above USD50 a barrel from last year's average of USD45.

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