RIYADH: Companies in the Gulf Cooperation Council are poised to extend their growth momentum into 2026 as strong demand, easing interest rates and supportive government policies bolster operating conditions, according to a new report.
In its latest report, Moody’s Ratings said ongoing investments in infrastructure and the rising number of technology-based projects are also key factors that will support the growth of non-financial companies operating in the region.
The findings reinforce the progress of economic diversification efforts undertaken by GCC member states, including Saudi Arabia, aimed at strengthening non-oil sectors and reducing reliance on crude revenues.
“GCC companies are expected to benefit from strong demand, declining interest rates, supportive economic policies, and ongoing investments in infrastructure and technology,” said Moody’s.
Sectoral breakdown
Telecom companies in the GCC are set to benefit from non-oil growth and regional governments’ ambitions for digitalization and modern technologies.
Citing an example, stc, one of the region’s biggest telecom operators, reported a net profit of SR11.58 billion ($3.08 billion) in the first nine months of this year, reflecting a 3.1 percent rise compared to the same period in 2024.
Moody’s added that real estate developers in the region are expected to see a stable operating environment in the near term, underpinned by strong demand fundamentals, such as population growth and smaller household sizes.
“However, we expect a moderate price correction to begin in 2026, driven by an increase in housing supply,” said the credit rating agency.
Companies operating in the utilities sector are expected to maintain strong market positions and benefit from stable and transparent regulatory frameworks.
However, for some firms, the large capital investment requirements needed to support power and infrastructure upgrades, particularly in renewables, are weakening credit metrics and liquidity.
The report further noted that GCC national oil companies are supported by low-cost production, robust balance sheets, and long-term strategies that help them withstand periods of low oil prices.
In November, energy giant Saudi Aramco reported a third-quarter 2025 adjusted net income of $28 billion, up slightly from $27.7 billion a year earlier, as strong operating momentum and progress on key projects underpinned performance.
Cash flow from operating activities rose to $36.1 billion from $35.2 billion in the same period last year, while free cash flow increased to $23.6 billion from $22 billion.
Turning to the wider sub-Saharan African region, Moody’s said the growth of non-financial corporates is underpinned by ongoing macroeconomic recovery and structural reforms, despite persistent challenges and the direct and indirect effects of US tariffs.
This supports the operating environment for telecommunications, as well as real estate and construction-related industries.
Growth in EMEA region
The outlook for credit conditions for non-financial companies in Europe, the Middle East and Africa for 2026 is stable.
“We expect growth to pick up modestly, and financial conditions have eased. While uncertainty about trade policy persists, EMEA companies have so far only felt limited effects from US tariffs,” said Moody’s.
Among the major factors expected to influence credit conditions in 2026 — particularly for non-financial companies — are political polarization and digital disruption, including advancements in artificial intelligence.
In terms of digital disruption, Europe has strong technical capabilities but faces a more fragmented venture capital market than the US and weaker scaling potential for AI firms.
The report said the sectors that will benefit most from AI include technology suppliers and data-driven industries such as healthcare and automotive, which will gain from enhanced analytics, predictive modeling, and decision support.
Key beneficiaries across the technology value chain include manufacturers of electrical components and systems used in data centers, such as Schneider Electric SE, Siemens Aktiengesellschaft, and ABB Ltd.
Moody’s further said that deteriorating security conditions in Europe — driven by the ongoing war in Ukraine and reduced US engagement in NATO — will lead to higher government defense spending, which will positively affect defense and related manufacturing industries.
US tariffs on branded drug imports will slightly pressure cash flows and add complexity for European branded pharmaceutical companies, but strong margins will limit credit risk.
Some companies have been negotiating tariff exemptions in exchange for US investments and price concessions for Medicaid patients and direct-to-consumer sales, both of which have minimal earnings impact.
Regarding GDP growth, Moody’s said the eurozone economy is expected to expand by 1.3 percent in 2026, compared to 1.1 percent in 2025.
“In Europe, political uncertainty is likely to continue to weigh on consumer sentiment and saving rates are still high because households remain cautious. Still, we expect retail sales and household spending to gradually recover as inflation eases and unemployment rates stay low,” said the report.
It added: “Monetary policy has eased as inflation has come under control, with the ECB cutting rates to 2 percent, lowering refinancing costs for euro-denominated debt. Credit market conditions have improved and companies have recently benefited from good access to capital markets.”
Saudi Arabia’s rapid growth
Saudi Arabia is among the EMEA economies expected to see rapid growth in the near term, with real GDP projected to expand by 4 percent in 2025 and further accelerate to 4.5 percent in 2026.
In November, Moody’s said in a separate report that Saudi Arabia’s economy is set to maintain solid growth in the coming years, driven by strong non-oil performance and the unwinding of OPEC+ production cuts.
The credit assessor, which rates Saudi Arabia at Aa3, said the grade reflects a large, wealthy economy supported by sizeable hydrocarbon reserves and a strong government balance sheet.
The outlook builds on earlier analysis published in October, when Moody’s highlighted steady progress in the Kingdom’s diversification agenda under Vision 2030.
The agency said at the time that Saudi Arabia is on track to sustain annual non-oil growth of 4.5 to 5.5 percent over the next five to 10 years, as major projects advance and private consumption remains firm.
Last month, another report by the Institute of Chartered Accountants in England and Wales echoed similar views, stating that Saudi Arabia’s economy is projected to expand by 4.5 percent in 2025, 4.3 percent in 2026, and 4.5 percent in 2027.
