Fitch Ratings sees “neutral” outlook for MENA sovereigns in 2026

Fitch Ratings has a mixed outlook for MENA sovereigns in 2026, with the ratings agency expecting steady oil prices, solid growth, and ongoing fiscal reforms, while taking into account persistent political and geopolitical risks, according to its Middle East and North Africa Sovereigns Outlook 2026 report, seen by EnterpriseAM. Fitch also predicts that economic diversification efforts backed by governments and government-related entities will support stronger GDP growth. This combination of factors led Fitch Ratings to pencil in a “neutral” outlook for sovereigns in the region.

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Eleven of the 14 MENA sovereigns rated by Fitch carry stable outlooks. The outlook for Israel and Bahrain remain negative, Oman holds its positive outlook, and Tunisia is the only sovereign in the region to see a rating action so far this year, with the country receiving a ratings upgrade.

Overall risks remain contained despite the uncertainty of the Gaza ceasefire and Israel’s escalating aggression in Lebanon, as well as the potential of renewed conflict between Iran and Israel. Jordan and Egypt are expected to benefit from increased regional stability, boosting sentiment and tourism inflows. For Egypt, the Houthis scaling down their attacks on shipping vessels in the Red Sea is expected to have a positive effect on the country’s fiscal and external position, Fitch notes.

Improved fiscal and external position is expected for some non-oil exporting countries, including Egypt, whose current account deficit is seen narrowing while maintaining a flexible exchange rate. Morocco will also see its current account deficit slightly narrowing on the back of tax reforms and lower capex spending. Jordan’s fiscal deficit is projected to remain “broadly stable,” with reforms expected to support the country’s external position. However, for Tunisia, Fitch projects a narrowed deficit, but does not see “meaningful fiscal reform.”

For non-oil exporters, reforms are expected to support economic and fiscal positions, though weak growth and social pressures will limit progress on reducing high debt burdens.

THE GCC VIEW-

Saudi Arabia and the UAE’s economies are expected to register the highest levels of growth in 2026, largely on the back of higher oil output production. For the UAE, some emirates are expected to outpace the country’s average growth in 2026, including Abu Dhabi (6.8%), which is expected to grow on the back of higher oil output, and Ras Al Khaimah (7.7%) thanks to increased investments.

Inflation levels are expected to remain contained in the GCC, with low single digits readings despite some pressures stemming from increased rental prices, except for Saudi Arabia due to its rental freeze policy.

As for the oil story, the agency sees Brent crude at an average of USD 63-65 / bbl in 2026, slightly below 2025 levels but still above the fiscal breakeven price for most GCC producers except Bahrain, Saudi Arabia, and — marginally — Oman.

Fiscal conditions for most Opec members will remain unchanged — except for Saudi Arabia: Increased oil production will offset the impact of lower oil prices on Saudi Arabia and the UAE’s revenues, Fitch said in the report. Meanwhile, non-oil activity and fiscal policy measures are anticipated to boost non-oil fiscal revenues. However, Saudi Arabia is set to exercise greater fiscal discipline, as central government debt is set to rise to 33% of GDP in 2026, up from 30.5% in 2025.

Breakeven oil prices differ across the GCC, hinting at different debt trajectories: Saudi Arabia is expected to increase its spending, thus accumulating more debt. In the UAE, government-related entities are expected to increase their contribution in the country’s development. Meanwhile, Oman is focused on reducing its debt and consolidating sovereign balances, Qatar has lowered spending levels following the World Cup, and Bahrain’s fiscal position remains uncertain, according to Fitch.

The GCC is projected to maintain its position as the largest issuer in international debt markets in 2026, due to the persistent need for investment financing and funding for the diversification projects, especially in Saudi Arabia and the UAE.

MARKETS THIS MORNING-

Most Asian markets are in the red, as they track Wall Street losses ahead of the US Federal Reserve’s interest rate decision tomorrow. The only outlier is Japan’s Nikkei, which is up nearly 0.2%. Wall Street futures, meanwhile, are a little higher, boosted by a small jump in Nvidia’s shares in afterhours trading.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.1% yesterday on turnover of SAR 3.4 bn. The index is down 11.7% YTD.

In the green: Bupa Arabia (+5.7%), East Pipes (+3.6%), and Artex (+3.6%).

In the red: Abo Moati (-6.5%), Jahez (-4.4%), and Build Station (-3.4%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.6% yesterday on turnover of SAR 19.3 mn. The index is down 24.0% YTD.

In the green: Almodawat (+11.2%), Mulkia (+7.7%), and Lana (+7.4%).

In the red: Inmar (-9.3%), Sure (-7.3%), and Altwijri (-7.1%).