Global Sukuk Market Growth to Continue in 2021 and Beyond

Global sukuk issuance is expected to rise to about $140bn-$155bn this year from $139.8bn in 2020, thanks to a recovery in issuance in Malaysia, Indonesia, and the GCC countries, according to S&P Global Ratings.

Market conditions should remain buoyant throughout 2021, with record-low interest rates and abundant liquidity. S&P also expects GDP growth in the core Islamic finance countries—the GCC countries, Malaysia, Indonesia, and Turkey—to recover from a sharp recession in 2020.

The international credit rating agency also assumes that the price of oil will stabilise at about $50 per barrel in 2021. Together, these factors underpin a stronger performance by the global sukuk market in 2021 than in 2020.

However, downside risks for the core Islamic finance countries remain significant. The main risk is that further waves of COVID-19 and the requisite containment measures may harm countries’ fragile economic recovery.

Over the next 12-18 months, there could be progress on a unified global legal and regulatory framework for Islamic finance, and some sukuk issuances that aim to tackle the social problems arising from the pandemic or support the energy transition, says S&P.