saudicarrocksReuters
Saudi Arabia was downgraded by Moody's, the US credit rating company, as low oil prices and falling economic growth begin to take their toll on the country's finances.
Moody's said "lower oil prices have led to a material deterioration in Saudi Arabia's credit profile," in a statement published on its website. 
"A combination of lower growth, higher debt levels and smaller domestic and external buffers leave the Kingdom less well positioned to weather future shocks," Moody's said.
The country's credit rating was downgraded one notch from Aa3 to A1. That's still in so-called investment grade territory and on a par with the Czech Republic and Slovakia. The UK is at Aa1.
Here's the Moody's rating scale:
Moodys1Moody's
Saudi Arabia is going through some sharp political changes as it tries to diversify its economy away from oil to protect its economy from persistently low prices.
So far, these moves have yet to help Saudi Arabia's finances. Moody's focused on lower economic growth forecasts as an explanation for its rating change.
Here's Moody's (emphasis ours): 
While the government has ambitious and comprehensive plans to address the shock by diversifying its economic and fiscal base, those plans are at an early stage of development and their impact remains uncertain.
Nominal GDP has dropped by 13.3% in 2015, and Moody's expects another 5% reduction in 2016. In line with the anticipated gradual recovery of oil prices, nominal GDP should reach its pre-oil price shock level by 2019. Due to fiscal consolidation in the form of streamlined government spending, Moody's expects real GDP growth to drop to 1.2% in 2016 from 3.4% in 2015.
Over the coming five years, growth will average 2%, much lower than the 5% annual average recorded in 2011 to 2015.
Lower growth makes the government's financing needs harder to cover, leading to a large deficit. Moody's said it expects "an average deficit of 9.5% of GDP between 2016 and 2020, requiring cumulative financing of SAR1.2 trillion ($324 billion or almost 50% of estimated nominal GDP in 2015)."
Meanwhile, foreign exchange reserves are dropping. "Saudi Arabia's buffers will continue to erode. Following a peak of $731 billion in August 2014, foreign exchange reserves have dropped by almost $155 billion to $576 billion as of March," said Moody's.
So, while Saudi Arabia only has a government debt level of around 6% of GDP at the moment, Moody's said it expects that to rise to 35% of GDP by 2018. 
And if country keeps getting downgraded, that debt is going to cost Saudi Arabia more in the form of higher interest rates.

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