(Bloomberg) -- Saudi Arabia’s sovereign rating was upgraded by Moody’s Investors Service for the first time since the company initially assessed it in 2016, driven by continued progress in the kingdom’s economic diversification and a better outlook for the non-oil sector.

The agency moved Saudi Arabia’s rating up a notch, to Aa3 from A1, its fourth-highest grade, according to a statement late Friday. The Moody’s rating is now above those of Fitch Ratings and S&P Global Ratings.

The Gulf country now stands on par with the likes of Hong Kong and Belguim, according to Moody’s, which changed its outlook for the kingdom to stable from positive.

“The upgrade reflects our assessment that economic diversification has continued to progress, and the momentum will be sustained,” Moody’s said in its statement. “Continued progress will, over time, further reduce Saudi Arabia’s exposure to oil market developments and long-term carbon transition.”

The rating company said the stable outlook “indicates balanced risks to the rating at a higher level.”

Still, “progress in the large diversification projects may crowd-in the private sector and spur the development of non-hydrocarbon sectors at a faster pace than we currently assume,” Moody’s analysts said. They expect the country’s non-oil economy to average between 4% and 5% in coming years, in line with government estimates.

The Gulf kingdom has been running consecutive quarterly budget deficits and is forecast to have annual fiscal shortfalls for years to come, according to government figures.

The Saudi government has also ramped up debt issuances this year. Its debt-to-GDP ratio is expected to rise to 35% by 2030, according to Moody’s

Economic output is now seen growing less than 1% this year, down from a prior forecast of 4.4%, according to government figures, while projections for 2025-2026 have also been significantly scaled back.

Despite the kingdom’s upgrade and positive fiscal indicators, “global growth and broader oil market developments are not conducive to high levels of public spending,” according to the Moody’s statement.

“A large decline in oil prices or production could intensify the trade-off between progress in economic diversification and fiscal prudence, potentially leading to a weaker sovereign balance sheet than we currently assume.”