Saudi economy feeling the strains of austerity

Our GDP Tracker suggests that Saudi Arabia’s economy slowed sharply at the start of this year as the impact of fiscal austerity weighed heavily on the non-oil sector. Meanwhile, today’s decision by Fitch to downgrade the Kingdom’s sovereign credit rating from AA to AA- does not materially affect the outlook for the economy. But it reinforces the point that the budget deficit is large and a substantial fiscal tightening will be required over the coming years, keeping growth subdued.