MENA sovereigns stable as reforms, fiscal strength cushion risks: Fitch

20/10/2025 03:48 AST

Sovereign ratings in the Middle East and North Africa remain resilient despite regional conflicts mainly supported by ongoing reforms and strong fiscal buffers, Fitch Ratings said.

In its latest regional peer review, the credit rating agency said there are currently no sovereigns rated below CCC+ for the first time since July 2019, with only Bahrain carrying a negative outlook.

The report also noted that the average rating for the region has slightly improved over the past year, with no downgrades recorded since early 2023.

Saudi Arabia is among the countries successfully advancing diversification efforts under Vision 2030 to reduce reliance on oil. Fitch rates the Kingdom A+ with a stable outlook, reflecting strong fiscal and external balance sheets.

"Deep and broad social and economic reforms implemented under Vision 2030 are diversifying economic activity, albeit at a meaningful cost to the balance sheets," Fitch said.

The agency noted that oil prices have remained surprisingly stable amid geopolitical tensions, as OPEC+ spare production capacity continues to support the market despite higher output levels.

Fitch expects oil to average $70 per barrel in 2025 and projects almost all Gulf Cooperation Council sovereigns to post fiscal surpluses next year.

Egypt has also shown solid growth, driven by recovering domestic demand. Fitch affirmed the country's B rating with a stable outlook.

For Bahrain, the negative outlook reflects persistent large deficits, high and rising interest costs, elevated debt-to-gross domestic product levels, and a difficult environment for fiscal consolidation.

Oman remains the only sovereign with a positive outlook in the region, underpinned by continued deleveraging by the government and state-owned entities, improved fiscal resilience to lower oil prices, and a stronger external balance sheet.

Kuwait holds an AA- rating with a stable outlook, supported by exceptionally strong fiscal and external positions, though constrained by weaker governance, heavy oil dependence, and an expansive welfare system.

Qatar is rated AA with a stable outlook, reflecting expectations that additional gas production will strengthen its public finances.

Fitch cautioned that regional growth prospects could come under pressure if conflicts escalate.

Arab News