Demand for Sharia-compliant financing is set to outpace conventional funding in 2023, driven by strong economic growth and development agendas in key markets including Saudi Arabia amid higher oil prices, Moody’s Investors Service has said.
Global sukuk issuance this year is forecast to “level off” in the range of $170 billion to $175 billion in 2023, supported by sovereign financing needs in key Asian markets of Malaysia and Indonesia and resilient demand from banking and corporate sectors, Moody’s said in a research note on Wednesday.
The levelling off of sukuk volumes follows a 10 per cent fall in 2022 to $178 billion given lower funding requirements from the six-member economic bloc of GCC region and South-east Asian markets.
“We expect Islamic banking in key markets to keep growing faster than conventional peers supported by robust economic activity in South-east Asia and the GCC region,” Ashraf Madani, vice president and senior credit officer at Moody’s, said.
“This will be driven by high commodity prices and governments' economic diversification agendas; sovereigns’ continued backing and promotion of the Islamic finance industry and growing demand for Sharia-compliant products.”
Although Saudi Arabia, the biggest Arab economy and the Opec’s leading oil exporter, and Malaysia will continue to lead sukuk issuances, the potential for growth in other jurisdictions also remains high, he said.
Long-term sovereign sukuk issuance will also stabilise in 2023 after two years of declines at around $80 billion level, before rising to around $80 billion to $85 billion in 2024.
The levelling off of global long-term sovereign sukuk issuance volumes at around last year's level follows the declining trend since the all-time high hit in 2020.
Issuance volumes fell 22 per cent to $80 billion in 2022 as significantly higher energy-related government revenue pushed fiscal deficits into surpluses for most GCC sovereigns and helped reduce fiscal deficits in Malaysia and Indonesia.
The post-pandemic economic recovery also supported stronger fiscal performance, which slashed the net financing needs of major sukuk-issuing governments.
Malaysia, Indonesia and Turkey are expected to be the largest sovereign issuers this year and next, Moody’s said in a separate report.
Supportive hydrocarbon prices continue to bolster fiscal balances of energy-exporting sovereign sukuk issuers. With most GCC sovereigns still recording budget surpluses this year and in 2024, Moody’s expects their issuances to be mainly driven by the need to either refinance or repay maturing sukuk.
“We expect significantly lower gross issuance from GCC to be broadly offset by higher volumes elsewhere, particularly in Indonesia, where domestic sukuk issuance dipped significantly in 2022,” Alexander Perjessy, senior credit officer at Moody’s, said.
Oil prices that surged more than 60 per cent in 2021, continued the upwards momentum in 2022. The wild swings triggered by Russia’s assault on Ukraine that pushed Brent to a notch under $140 per barrel settled towards the end of last year and the benchmark for two thirds of the world’s closed 2022 at about $80 per barrel mark.
It is still trading at more than $83 a barrel level, which supports the budgets of energy-exporting nations of the Gulf region. Continuing current account surpluses also give GCC sovereigns the financial muscle to implement their development agendas, which they are partly funding through a combination of conventional and Islamic financing.
Despite lower funding requirements in 2022, GCC countries, along with Malaysia and Indonesia, remained the largest issuers of sovereign sukuk. Together they accounted for 77 per cent of total long-term gross sovereign sukuk issuance and 87 per cent of outstanding long-term sovereign sukuk issuance at the end of last year, according to Moody’s data.
Within the GCC, Saudi Arabia was the single largest issuer since the launch of its domestic riyal-denominated sukuk issuance programme in 2017, accounting for 78 per cent of outstanding government sukuk sold in the region and 34 per cent of government sukuk issued globally.
“Malaysia, Indonesia and Turkey were the next three largest sovereign issuers in 2022, with market shares of 25 per cent, 19 per cent and 5 per cent, respectively,” Moody’s analysts said.
The specs: 2018 Nissan 370Z Nismo
The specs: 2018 Nissan 370Z Nismo
Price, base / as tested: Dh182,178
Engine: 3.7-litre V6
Power: 350hp @ 7,400rpm
Torque: 374Nm @ 5,200rpm
Transmission: Seven-speed automatic
Fuel consumption, combined: 10.5L / 100km
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How to become a Boglehead
Bogleheads follow simple investing philosophies to build their wealth and live better lives. Just follow these steps.
• Spend less than you earn and save the rest. You can do this by earning more, or being frugal. Better still, do both.
• Invest early, invest often. It takes time to grow your wealth on the stock market. The sooner you begin, the better.
• Choose the right level of risk. Don't gamble by investing in get-rich-quick schemes or high-risk plays. Don't play it too safe, either, by leaving long-term savings in cash.
• Diversify. Do not keep all your eggs in one basket. Spread your money between different companies, sectors, markets and asset classes such as bonds and property.
• Keep charges low. The biggest drag on investment performance is all the charges you pay to advisers and active fund managers.
• Keep it simple. Complexity is your enemy. You can build a balanced, diversified portfolio with just a handful of ETFs.
• Forget timing the market. Nobody knows where share prices will go next, so don't try to second-guess them.
• Stick with it. Do not sell up in a market crash. Use the opportunity to invest more at the lower price.
RESULTS
Bantamweight: Jalal Al Daaja (JOR) beat Hamza Bougamza (MAR)
Catchweight 67kg: Mohamed El Mesbahi (MAR) beat Fouad Mesdari (ALG)
Lightweight: Abdullah Mohammed Ali (UAE) beat Abdelhak Amhidra (MAR)
Catchweight 73kg: Mosatafa Ibrahim Radi (PAL) beat Yazid Chouchane (ALG)
Middleweight: Yousri Belgaroui (TUN) beat Badreddine Diani (MAR)
Catchweight 78KG: Rashed Dawood (UAE) beat Adnan Bushashy (ALG)
Middleweight: Sallah-Eddine Dekhissi (MAR) beat Abdel Enam (EGY)
Catchweight 65kg: Yanis Ghemmouri (ALG) beat Rachid Hazoume (MAR)
Lightweight: Mohammed Yahya (UAE) beat Azouz Anwar (EGY)
Catchweight 79kg: Souhil Tahiri (ALG) beat Omar Hussein (PAL)
Middleweight: Tarek Suleiman (SYR) beat Laid Zerhouni (ALG)
Read more about the coronavirus
Sri Lanka-India Test series schedule
- 1st Test India won by 304 runs at Galle
- 2nd Test Thursday-Monday at Colombo
- 3rd Test August 12-16 at Pallekele
The biog
Job: Fitness entrepreneur, body-builder and trainer
Favourite superhero: Batman
Favourite quote: We must become the change we want to see, by Mahatma Gandhi.
Favourite car: Lamborghini
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Key developments in maritime dispute
2000: Israel withdraws from Lebanon after nearly 30 years without an officially demarcated border. The UN establishes the Blue Line to act as the frontier.
2007: Lebanon and Cyprus define their respective exclusive economic zones to facilitate oil and gas exploration. Israel uses this to define its EEZ with Cyprus
2011: Lebanon disputes Israeli-proposed line and submits documents to UN showing different EEZ. Cyprus offers to mediate without much progress.
2018: Lebanon signs first offshore oil and gas licencing deal with consortium of France’s Total, Italy’s Eni and Russia’s Novatek.
2018-2019: US seeks to mediate between Israel and Lebanon to prevent clashes over oil and gas resources.
Director: Laxman Utekar
Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna
Rating: 1/5