Fitch: Reforms Support MENA Sovereign Ratings Amid Conflicts

Press Statement 

Growth is strengthening across the region, especially in oil producers supported by higher oil production and state-investment‑fuelled non-oil growth. There has also been strong growth in Egypt, due to recovering domestic demand, and Morocco, underpinned by solid investment dynamics and better weather conditions.

There has been no impact on ratings from the recent conflicts in the region (except for Israel), largely because they have mostly been geographically contained to unrated sovereigns. However, the evolution of the conflicts, particularly any renewal of military activity between Iran and Israel, is a significant downside risk.

Oil prices have been surprisingly stable given the geopolitical turmoil. OPEC+ spare production capacity has supported the market and remains ample despite rising production. At Fitch’s forecast price of USD70/bbl for 2025, all Gulf Cooperation Council sovereigns except Bahrain and Saudi Arabia are projected to record fiscal surpluses.

There has been a small improvement in the average rating for the region over the past 12 months despite lower oil prices and regional conflicts. The net upgrade balance is two and the region is in its longest period without a downgrade since 1H15.

The net outlook balance is -1 and the recent upgrade of Tunisia means there are no sovereigns rated below ‘CCC+’ for the first time since July 2019. There are two sovereigns on Negative Outlook. Israel and Bahrain. Oman has the sole Positive Outlook.

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Saudi Arabia retained its A+ stable rating, reflecting the kingdom’s strong fiscal and external positions. Fitch said Riyadh’s finances have become less dependent on oil, though vulnerabilities remain. It highlighted that the sweeping social and economic reforms under Vision 2030 are transforming the Saudi economy but at a high fiscal cost. 

The agency forecasts the Saudi economy will expand by 4.5% in 2025 and 5.2% in 2026, with only Saudi Arabia and Bahrain expected to post modest budget deficits next year as they balance diversification spending with fiscal consolidation.

In the United Arab Emirates, Fitch affirmed an AA- rating with a stable outlook, citing its strong net external asset position and high per capita income. The UAE’s consolidated fiscal surplus is expected to continue through 2027, assuming steady oil prices, with government debt remaining around 25% of GDP. 

The agency projects the UAE economy to grow 5.2% in 2025 and 5.8% in 2026, in line with upgraded forecasts by the International Monetary Fund.

Egypt also maintained its B rating with a stable outlook, balancing its large and diverse economy and solid multilateral support against high inflation, fiscal pressures, and significant external financing needs. Fitch expects Egypt’s GDP to grow 4.7% in fiscal year 2025–2026 and 4.9% the following year, supported by reforms and continued investment flows.

Morocco, rated BB+ with a stable outlook, was commended for its prudent macroeconomic policies, strong donor support, and comfortable foreign reserve levels. Fitch anticipates the country’s fiscal deficit will hold near 3.8% of GDP in 2025 and average 3.1% through 2027, aided by recent tax reforms that boosted compliance and stabilized revenues. Morocco’s economy is forecast to grow 4.4% in 2025 and moderate to around 3.9% in subsequent years.

Overall, Fitch said the region’s improved credit profile reflects the success of long-term economic diversification and reform agendas, particularly in the Gulf, which have mitigated the fiscal risks of lower oil revenues and geopolitical uncertainty. 

The report concluded that while the Middle East remains exposed to regional flashpoints, its economies are increasingly defined not by crisis management, but by calculated reform and resilience.