Saudi’s ageing population could impact finances, debt – S&P

Saudi Arabia ageing population could put greater pressure on public finances and increase government debt over the next three decades, ratings agency Standard & Poor’s has warned.

In a report, the firm forecast the Saudi Arabian population would expand from 32 million to 46 million people from 2015 to 2050, with the proportion of elderly people increasing to 15 per cent from 3 per cent today.

S&P warned that government expenditure on pensions and health care would increase from 6 per cent of GDP to 14 per cent as a result.

“This could lead to a rapid increase in Saudi Arabia’s net debt ratio to 340 per cent of GDP by 2050 if governments were to take no further policy action,” said S&P Global Ratings analyst Trevor Cullinan. “The sovereign credit ratings on Saudi Arabia would decline to speculative-grade in such a no-policy-change scenario, which is not our base case.”

He added that subscribers to Saudi Arabia’s generous pension system had been outstripping growth in the number of beneficiaries contributing to the system.

This could lead the government to consider demographic reforms to ensure a more sustainable system, Cullinan said.

The agency’s warnings come as part of a larger global study on the cost of ageing to national governments.

Earlier this year, it lowered its rating for Saudi Arabia from A- to A-2 due to the slump in oil prices.

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