It will be another year of robust economic growth in the Middle East in 2026 despite lower oil prices, according to Fitch Ratings.

"We project median growth among member states of the Gulf Cooperation Council (GCC), Egypt, Iraq, Israel and Jordan at 4%, up from 3.4% in 2025. However, Iran and other regional geopolitical hotspots will continue to pose credit risks," stated the top ratings agency in its review.

"We expect that the oil price will stay above fiscal break-even levels for all GCC sovereigns, except Bahrain, Saudi Arabia and, more marginally, Oman. Reforms have raised revenues and curbed spending on wages and subsidies in most of these countries, which has strengthened the resilience of sovereign credit profiles to weaker oil prices," it added.

Fitch Ratings pointed out that its baseline oil price should be sufficient to sustain continued strong public capital expenditure. 

This will underpin steady earnings for corporates, especially in energy and infrastructure, and should help to drive robust non-oil sector expansion, supporting diversification, it stated.

Corporate borrowing will, in turn, be a major driver of increases in bank lending across the region. The vast majority of GCC corporate ratings are on Stable Outlook but shrinking leverage headroom and low interest cost cover remain constraints for cyclical sectors and more leveraged issuers.

According to Fitch, the domestic liquidity will be solid this year in most of the markets in the region, reflecting its belief that the oil price should drive sufficient deposit growth to fund the anticipated expansion in lending. 

"However, tightening liquidity has encouraged Saudi banks to diversify funding sources, supporting local debt capital market expansion, including international issuance. We expect this to continue in 2026, amid robust international investor demand for investment-grade Saudi debt," it added.-TradeArabia News Service