Gulf Cooperation Council Companies Maintain Strong Credit Qualities Amid Geopolitical Uncertainty
Despite the ongoing geopolitical tensions that have been affecting the global economy, companies in the Gulf Cooperation Council (GCC) region have demonstrated remarkable resilience and maintained strong credit qualities. This is according to a recent report from Moody’s Investors Service, which highlights the GCC firms’ ability to withstand the economic uncertainty caused by these tensions.
Key Factors Contribute to Credit Stability
A significant number of GCC firms continue to benefit from strong balance sheets, low leverage, and ample cash reserves, ensuring financial stability and resilience. This is a crucial factor in maintaining credit quality, as it enables companies to withstand external shocks and navigate complex market conditions. The report emphasizes that outstanding debt remains steady at $410 billion last year and is likely to remain at this level in 2025.
The main source of near-term credit risk in the region is still heightened geopolitical tensions. However, sound economic and operating conditions, robust business models, effective operating execution, and financial discipline are cited as key reasons for the stability seen by many companies. These factors collectively contribute to good financial performance, strong credit metrics, and solid liquidity, which are likely to be sustained over the next 12 months.
Mitigating Geopolitical Risks
Mikhail Shipilov, vice president and senior analyst at Moody’s Ratings, highlights that many GCC companies have features that mitigate geopolitical risks. These features include geographic diversification of operating assets, alternative supply routes, or a focus on domestic markets. Shipilov emphasizes that these factors have had a limited effect so far on credit quality.
Many GCC companies have adopted strategic measures to mitigate risks from geopolitical uncertainties. Several companies have diversified their operational presence, securing stability through international markets. Alternative supply routes and a focus on domestic demand provide an additional buffer against potential disruptions. Moody’s report notes that while Qatari firms remain relatively more exposed due to their asset concentration, their strong sovereign backing and liquidity reserves continue to reinforce financial resilience.
Favorable Macroeconomic Conditions
Macroeconomic conditions remain favorable for domestic-driven sectors, including real estate, telecommunications, and utilities. Economic diversification initiatives, particularly in Saudi Arabia and the UAE, continue to drive non-hydrocarbon growth. The UAE’s economy is forecast to have expanded by 3.8 percent in 2024, with 4.8 percent growth in 2025, supported by a buoyant real estate sector and strong foreign investment.
Saudi Arabia’s Economic Growth
Saudi Arabia is set to see 3.3 percent GDP growth in 2025 and 4.8 percent in 2026, bolstered by large-scale infrastructure projects and a growing tourism sector. The country’s efforts to diversify its economy through initiatives such as the National Industrial Development and Logistics Program (NIDLP) are expected to contribute positively to economic growth.
Resilience of Export-Oriented Companies
Export-oriented companies, especially in the oil, gas, and petrochemical industries, continue to demonstrate resilience. Saudi Aramco stands out with its "immense operational scale, low production costs, and downstream integration." QatarEnergy benefits from vast, low-cost gas reserves and an expanding liquefied natural gas portfolio, securing its role as a major player in the energy sector.
Regional petrochemical companies leverage cost-efficient feedstock and advanced facilities to maintain a competitive edge in global markets. The report highlights that these companies are well-positioned to navigate complex market conditions due to their operational efficiency and strategic positioning.
Credit Outlook Remains Stable
The credit outlook for GCC corporates remains stable, supported by sound financial policies and government-led economic initiatives. The region’s companies continue to benefit from strong fundamentals, which provide a solid foundation for future growth. While geopolitical tensions remain a near-term concern, the report suggests that GCC firms are well-equipped to withstand these risks and maintain their credit stability.
Conclusion
In conclusion, the recent report from Moody’s Investors Service highlights the resilience of GCC companies in maintaining strong credit qualities despite ongoing geopolitical uncertainty. The region’s favorable macroeconomic conditions, robust business models, and effective operating execution contribute to this stability. While there are concerns about near-term credit risk, the report emphasizes that GCC firms have features that mitigate these risks, ensuring their financial stability and resilience. As the global economy continues to navigate complex market conditions, it is essential for investors and analysts to understand the dynamics driving credit quality in the GCC region.