Market Update: GCC corporates poised for rating stability in 2026: S&P – Full Analysis

RIYADH: Most rated companies in the Gulf Cooperation Council are expected to maintain stable credit profiles in 2026 despite geopolitical uncertainty and moderately lower oil prices, according to S&P Global Ratings.

In its report, “GCC Corporate and Infrastructure Outlook 2026: Stability Despite Uncertainty,” S&P said strong credit quality, ample liquidity buffers and sovereign support should enable issuers to navigate potential tail risks. The report does not constitute a rating action.

Economic growth across the GCC is projected at 2-4 percent in 2026-27, supported by solid domestic demand, government infrastructure spending and rising hydrocarbon output.

Diversification efforts are gradually reducing volatility. Non-oil sectors now account for about 75 percent of GDP in the UAE and 71 percent in Saudi Arabia, while average inflation across the bloc is expected to hold steady at around 2 percent over the next two years.

Geopolitical tensions remain a key downside risk. While S&P’s base case assumes limited credit impact, it cautioned that severe disruptions — such as a temporary closure of the Strait of Hormuz — could hamper oil exports, tighten financing conditions and pressure corporate performance.

“Severe and disruptive credit scenarios are possible,” S&P said, adding that regional capital markets and financial systems have demonstrated resilience during past episodes, limiting broader spillovers.

The agency also flagged risks stemming from prolonged US-Iran tensions and potential secondary US tariffs. However, it expects limited direct impact on the UAE and Oman, citing modest trade exposure to the US and tariff exemptions for key commodities.

Fitch Ratings echoed a similar view in its latest regional outlook, maintaining a “neutral” stance on GCC corporates for 2026. It said steady operating conditions, strong business profiles and continued state-led investment programs should underpin credit fundamentals and market access.

Funding conditions remain supportive. Rated GCC companies raised $9.7 billion in January 2026, up from $2 billion in the same month a year earlier.

S&P expects refinancing requirements to average about $20 billion annually over the next four years, with no major maturity concentrations. More than 90 percent of rated issuers are assessed as having adequate or stronger liquidity.

Capital expenditure needs remain significant, particularly in Saudi Arabia, where roughly 29 percent of rated companies’ capex in 2026-27 is tied to government-related entities and Vision 2030 projects. Despite reports of project reviews, S&P expects near-term spending plans to proceed, with commitments largely secured over the next 24 months.

Sector dynamics vary. National oil companies are viewed as well positioned to absorb lower crude prices, supported by strong balance sheets and low production costs. Dubai’s real estate developers are expected to see growth moderate after four years of double-digit expansion, while chemicals producers continue to face a prolonged downturn in global petrochemical prices.

Telecom operators are projected to post annual revenue growth of 2-4 percent in 2026-27, driven by investments in 5G and data centers, though margins may come under slight pressure.

In infrastructure and project finance, long-term contractual revenue models and sovereign linkages underpin stable credit profiles. Public-private partnerships are expanding beyond utilities into transport, social and digital infrastructure, with Saudi Arabia playing a leading role in regional development.

About 66 percent of S&P-rated GCC corporates and infrastructure issuers are investment-grade, and 97 percent carry stable outlooks. Government-related entities account for roughly 58 percent of rated issuers, benefiting from up to six notches of uplift from sovereign support.

Overall, S&P expects ratings stability in 2026, citing manageable refinancing risks, supportive funding conditions and continued government backing, even as oil price movements and geopolitical tensions remain key sensitivities.