Fitch Ratings on Tuesday lowered Saudi Arabia's long-term credit rating, saying the plunge in oil prices had "major negative implications" for the world's biggest crude exporter.
The agency also noted increased tensions with long-time rival Iran and greater uncertainty over economic policy, now overseen by Deputy Crown Prince Mohammed bin Salman.
Fitch downgraded the kingdom's credit rating to AA- from AA, which still denotes expectations of very low default risk.
The outlook remains negative, indicating that a further cut is likely.
Fitch said it had revised downwards its oil price assumptions for this year and next, to $35 and $45 a barrel, which "has major negative implications for Saudi Arabia's fiscal and external balances".
In February another agency, Standard and Poor's, cut the kingdom's credit rating by two notches to A-, citing the impact of lower oil prices on Saudi finances.
Last month, Moody's placed Saudi Arabia and other Gulf oil producers on review for downgrades.
Oil prices have collapsed from above $100 in early 2014, and on Tuesday were trading at just over $40.
The fall led Riyadh to impose unprecedented cuts in its 2016 budget -- which projects a deficit of $87 billion -- and to push economic diversification.
The government has said oil income made up 73 percent of revenue in 2015, compared with an average of 90 percent in the previous decade.
To cope with the fiscal gap, it raised retail fuel prices by up to 80 percent in December and cut subsidies for electricity, water and other services.
It has also delayed some major projects under King Salman, who acceded to the throne last year.
Referring to such efforts, Fitch said: "The pace of fiscal consolidation has increased."
It said further reforms are to be presented under a "National Transformation Programme" to boost non-oil revenues and streamline spending.
"Even if fully implemented, the measures will not prevent a substantial erosion of fiscal and external buffers during 2016 and 2017, although the buffers will still be sufficiently high to constitute an important rating strength," Fitch said.
Salman named his son Prince Mohammed as defence minister and head of the main Council of Economic and Development Affairs. Mohammed also chairs a body overseeing state oil company Saudi Aramco.
"Control over economic policy making has been concentrated in the hands of Prince Mohammed," Fitch said.
"This may have contributed to an acceleration of the economic policy making process, but has also reduced the predictability of decision-making."
The agency also noted that Saudi Arabia faces high geopolitical risks relative to AA-rated peers.
"Tensions have risen between Saudi Arabia and its long-standing regional rival Iran, and are expected to persist, although a direct confrontation is highly unlikely."
Fitch mentioned Saudi Arabia's military intervention in Yemen and its policy towards Syria, showing "a greater assertiveness".
For more than a year the kingdom has led an Arab military coalition supporting Yemen's government against Iran-backed rebels.
Fitch said other Saudi indicators are also "weaker" compared with its peers. These include GDP per capita and World Bank measures of governance, which include "accountability" and "rule of law".
According to the International Monetary Fund, Saudi Arabia's economy grew by 3.4 percent last year.
Fitch sees growth slowing to 1.5 percent this year and 1.7 percent in 2017.
Saudi Arabia is to meet on Sunday in Doha, Qatar with other members of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers including Russia.
They are to discuss a proposal to freeze output at January levels to try to ease oversupply and support prices.