Aramco's lower dividend payouts announced for 2025 are broadly in line with Fitch Ratings' forecast when it affirmed Saudi Arabia's rating at 'A+'/Stable in January, and will widen the budget deficit accordingly, Fitch Ratings said on March 11.

Aramco announced on March 4 that its performance-related dividend in the first quarter of 2025 would be reduced to $200mn, from $10.8bn in the same period of 2024, while the base dividend rose by 4.2% to $21.1bn.

The company anticipates total dividend payments of $85.4bn over 2025, equivalent to around 7.7% of Fitch-forecast GDP.

Around 82% of this amount should flow directly to the government budget, in line with its equity stake, with a further 16% going to the Public Investment Fund (PIF). This aligns with Fitch's existing view that total dividend payments will average around $82bn a year over 2025-2028.

The announcement is broadly consistent with Fitch's January projection that the budget deficit would widen to 3.8% of GDP in 2025 and 3.9% in 2026.

This forecast assumed oil prices of $70/barrel in 2025 and $65/barrel in 2026, and that Aramco's performance dividend would be substantially reduced.

The government's latest medium-term fiscal projections indicate a lower deficit of 2.3% of GDP in 2025, revised upward from 1.6% in the 2024 budget.

Fitch believes the authorities retain flexibility to adjust expenditure, particularly on investment, as they balance capital spending priorities and fiscal targets.

OPEC+ members confirmed in early March their intention to proceed with unwinding voluntary output cuts as agreed in December.

This means Fitch expects Saudi Arabia's oil production to rise by around 10% by end-2026, to almost 10 million barrels per day, driving an expansion in oil sector GDP of 2.7% in 2025 and 6.4% in 2026.

Large sovereign net foreign assets and significant fiscal buffers remain key strengths for Saudi Arabia's credit profile. Fitch projects government debt/GDP to rise to 35.3% by end-2026, from 29.7% at end-2024, but still well below the projected peer median of 55.1%.

"We believe contingent liabilities are rising as government-related entities, particularly the PIF, step up borrowing, but are still dwarfed by GRE assets," Fitch added in its statement.