Aramco oil facility near al-Khurj area, just south of the Saudi capital Riyadh on Sept. 15, 2019. Fayez Nureldine | AFP | Getty Images

DUBAI — Saudi Arabia's strong credit rating has been taken down a notch by a major ratings agency thanks to geopolitical risks and concerns over the safety of its economic infrastructure. Fitch has downgraded the kingdom's long-term foreign currency issuer default rating from A+ to A, the New York-based agency announced Monday. Its outlook remains stable. "The downgrade reflects rising geopolitical and military tensions in the Gulf region, Fitch's revised assessment of the vulnerability of Saudi Arabia's economic infrastructure and continued deterioration in Saudi Arabia's fiscal and external balance sheets," Fitch said in a release. The downgrade comes roughly two weeks after the heart of the kingdom's oil infrastructure was hit by a drone and cruise missile attack that Riyadh and Washington have blamed on Iran. Riyadh was quick to rebuke the agency's move. "The Ministry of Finance is disappointed that Fitch took a swift decision to downgrade the Kingdom," read a statement issued by Saudi Arabia's finance ministry within a few hours of Fitch's announcement. "Rather, the event highlights Saudi Arabia's outstanding capacity to effectively deal with adversities, commitment to maintaining stability in the global oil markets, and the Kingdom's status as an important international ally," it said. "As such, the downgrade of the rating comes across as somewhat speculative without direct reference to the swift, decisive and effective response to the event," the ministry added.

The pre-dawn attacks on September 14 hit two of state oil giant Saudi Aramco's largest oil facilities, Abqaiq and Khurais, forcing the country to temporarily shut down roughly 50% of its output, more than 5% of the global oil supply. The following Monday, international benchmark Brent crude rose as much as 19.5% to $71.95 per barrel at the open ⁠— the biggest jump on record ⁠— before paring gains. Fitch acknowledged Saudi state oil giant Aramco's quick recovery, noting that it has already restored or substituted its lost production, "demonstrating resilience to the attacks" and reflecting "both the ability to implement rapid repairs and significant spare oil." "Although oil production was restored fully by end-September, we believe that there is a risk of further attacks on Saudi Arabia which could result in economic damage," the agency added. "We have revised our assessment of the vulnerability of Saudi Arabia's economic infrastructure to regional military threats as a result of the most recent attack."

The agency went on to describe the kingdom as "vulnerable to escalating geopolitical tensions" because of its U.S.-aligned foreign policy concerning Iran and its involvement in the Yemen War. "We see a risk that the U.S. and Saudi Arabia could be drawn into a deeper conflict with Iran, as Iran or groups linked to Iran continue to seek to break the diplomatic impasse over regional security and nuclear issues," the statement read.

Fiscal deficit woes?

Fitch also attributed its decision to Saudi Arabia's "continued fiscal deficits" — when government spending exceeds its income — forecasting a fiscal deficit of 6.7% of gross domestic product (GDP) this year compared to 5.9% in 2018. The deficit stems from increased state spending, lower average oil prices and lower oil production. Further weakening oil prices in line with the agency's Brent crude price forecast of $62.50 per barrel for 2020 and $60 per barrel in 2021 "will create headwinds for fiscal consolidation and the government's goal of balancing the budget by 2023," Fitch said. A dim economic growth and oil demand outlook thanks in part to concerns over the U.S.-China trade war has kept a ceiling on oil prices, which so far haven't sustained significant gains despite terror attacks on energy facilities.

udi defence ministry spokesman Colonel Turki Al-Malik displays on a screen drones which Saudi government says attacked an Aramco oil facility, during a news conference in Riyadh, Saudi Arabia September 18, 2019. Hamad I Mohammed | Reuters