Fitch Ratings: Global Sukuk Market Expected to Surpass $1 Trillion in 2024
Fitch Ratings, a renowned credit rating agency, has projected that the global sukuk market will exceed $1 trillion this year. This forecast comes despite potential obstacles such as geopolitical events, monetary tightening, and fluctuating oil prices. In a recent report, Fitch noted that the global sukuk market experienced a significant expansion of 10.3 percent year-on-year, reaching $850 billion in 2023. These impressive figures were achieved despite ongoing turbulence arising from the Israel-Gaza conflict.
Last year, sukuk accounted for 29 percent of the total debt capital market issuance in core markets including the Gulf Cooperation Council (GCC), Malaysia, Indonesia, Pakistan, and Türkiye. This percentage represented a decline from the previous year, down from 35 percent in 2022. Additionally, sukuk recorded a 40 percent share in US dollars, with a slight decrease of 1.6 percent compared to the preceding year. However, US dollar sukuk issuance in core markets, including multilateral institutions, saw a massive increase of 40 percent, amounting to $52 billion. Simultaneously, US dollar bond issuances also surged by 53 percent. It is important to note that sukuk issuance in all currencies in core markets experienced a decline of 19 percent year-on-year, but the GCC witnessed a significant rise of 178 percent in US dollar sukuk issuance during the same period.
Overall, Fitch-rated sukuk issuers enjoyed a stable credit profile in 2023, with an investment-grade rating for 79.2 percent of them, up from 78.1 percent in the previous year. The report also highlighted the growing proportion of stable outlooks, which surged to 93.6 percent in 2023 from 69.9 percent in 2022. However, positive outlooks significantly dropped to 3.6 percent from 20.6 percent in 2022, primarily due to the sovereign upgrades of Saudi Arabia and Oman. Discussing these findings, Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings, expressed satisfaction, stating, We did not see any major sukuk default or additional credit-related complexities in 2023. He further added, We also witnessed pockets of growth despite volatilities. Funding and diversification goals are likely to drive the issuance in 2024.
With the sukuk market poised to cross the $1 trillion mark this year, market participants remain optimistic. Fitch Ratings’ report indicates that investors and issuers alike are increasingly turning to sukuk as a viable financing option. This sentiment is also fueled by the stable credit profile of sukuk issuers and the notable growth potential exhibited in core markets.
As we welcome the projected growth of the global sukuk market, it is crucial to acknowledge the significance of sukuk in contributing to sustainable economic development and financial inclusion. By embracing this Islamic financing instrument, countries around the world can foster a more diversified and resilient economy.
In conclusion, while geopolitical events, monetary tightening, and volatile oil prices present potential challenges, Fitch Ratings believes that the global sukuk market will continue its upward trajectory. Notwithstanding the complexities of the current global landscape, the sukuk market’s remarkable performance in 2023 indicates its resilience and potential for further growth in the coming year.
Note: This article has been generated based on available information and market projections. It is advised to seek professional financial advice before making any investment decisions.
