Fitch Ratings has affirmed its ‘neutral’ outlook for GCC non-financial issuers, citing supportive oil prices, continued infrastructure investment (particularly in Saudi Arabia and the UAE), and the interconnectedness of sovereign-owned institutions and corporations.
This is Fitch’s first cross-sector outlook for the GCC.
Fitch forecasts stable or rising real GDP growth for most Middle Eastern countries in 2025, especially Saudi Arabia and Abu Dhabi, driven by non-oil activity. Fiscal consolidation may limit direct equity support for government-related entities (GREs), potentially increasing their reliance on market debt. Most rated GREs maintain healthy financial profiles despite rising debt.
Non-financial issuers are expected to diversify financing, accessing international markets through sukuk, bonds, and minority equity stakes. Many GCC corporates and infrastructure companies are directly or indirectly government-owned. Regional growth is fuelled by ambitious development targets, including megaprojects, tourism development, and real estate/manufacturing growth.
Fitch maintains a ‘neutral’ 2025 sector outlook for GCC corporates, anticipating stable earnings from public spending, especially in infrastructure and energy. ‘Giga project’ rescaling in early 2025 is possible. Many GCC issuers are owned by sovereign wealth funds and rated under Fitch’s GRE criteria.
Over 90 per cent of the rated portfolio has a Stable Outlook, reflecting the GRE nature of many issuers. Positive/Negative Outlooks are concentrated in ‘B’ category corporates.
GCC utilities are expected to see increased 2025 capex focused on network expansion, digitalisation, and efficiency, though spending may fall short due to independent power producer plant delays. Property companies and developers are expected to maintain low-to-moderate leverage despite high funding costs. Development will be driven by overseas investors, longer UAE residencies, and evolving Saudi investment frameworks. Corporate debt market issuances, especially for non-investment grade issuers, are expected to continue, potentially driven by rate cuts.
The high-yield homebuilder market will remain competitive. Middle East/eastern Mediterranean ports face overcapacity risks. A planned regional rail network extension is expected to increase long-term port traffic. Saudi power sector contract risks are primarily operational and construction-related, but untested legal frameworks could pose financing challenges. GCC countries are heavily investing in data centres. Airport capacity is planned to double in 10 years.
“Fitch’s government support expectations significantly influence many GCC ratings,” said Paul Lund, head of corporate ratings for Middle East and Africa at Fitch. “Continued economic growth and clear investment frameworks should boost standalone financing for utility, infrastructure, and real estate projects.”
avinash@gdnmedia.bh
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