Risk index in Israel and Saudi Arabia worsens the most among emerging markets

Risk index in Israel and Saudi Arabia worsens the most among emerging markets

Israel and Saudi Arabia were the countries whose sovereign risk scores worsened the most during the first half of the yeardue to the deterioration of their fiscal positions, according to Goldman Sachs.

Goldman economist Farouk Soussa said Israel’s war with Hamas and its drain on public finances caused the biggest decline in emerging market sovereign risk scores in the first six months of 2024.

Fiscal pressures in Saudi Arabia were the highest among its Gulf neighbours, Goldman said. “High spending on giga-projects related to Vision 2030 reduces the scope for consolidation of spending in the medium term,” Soussa wrote in the report released Monday, referring to Crown Prince Mohammed Bin Salman’s ambitious plan to transform the economy.

Goldman takes into account economic, governance, fiscal, external and monetary parameters to develop its overall risk score out of five. The change in Israel’s score during the first half of this year compared to the second half of 2023 was -2.81while the difference for Saudi Arabia stood at -1.21, according to the report.

Saudi Arabia is forecasting budget deficits every year until at least 2026. Financing costs for multi-billion-dollar projects have been mounting for the country, which remains dependent on energy for the bulk of its public revenue.

Downward revisions to the balanced budget forecasts due to lower oil revenues led to downgrades in scores for other Gulf Arab countries, including Oman and Bahrain.