An uptrend in global sukuk issuance has been projected for 2024, with the market expected to cross $1 trillion in the medium term, according to Fitch Ratings, despite geopolitical events, monetary tightening, and fluctuating oil prices.

Last year ended with the global outstanding sukuk market expanding by 10.3% year-on-year to reach $850 billion, despite volatilities with the ongoing Israel-Gaza conflict.

In core markets such as the GCC, Malaysia, Indonesia, Pakistan, and Türkiye, sukuk had a 29% debt capital market issuance share in all currencies last year, down from 35% in 2022, and 40% share in US dollars, down 1.6% from the previous year. 

US dollar sukuk issuance in core markets (including multilaterals) rose by 40% year-on-year to $52 billion, while US dollar bonds were up 53%. However, sukuk issuance in all currencies in core markets fell by 19% year-on-year. 

In the GCC, US dollar sukuk issuance rose 178% over the same period.

The credit profile of Fitch-rated sukuk issuers remained stable overall in 2023, with 79.2% investment grade, up from 78.1% the previous year.

The share of stable outlooks also grew last year, jumping to 93.6% in 2023 from 69.9% in 2022.

The positive outlooks though significantly fell to 3.6% from 20.6% in 2022, mainly linked to the sovereign upgrades of Saudi Arabia and Oman.

“We did not see any major sukuk default or additional credit-related complexities in 2023,” said Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings, said in a statement.

He added: “We also saw pockets of growth in 2023 despite volatilities. Funding and diversification goals are likely to drive 2024 issuance.”

In 2024, sukuk will continue being a sizeable part of the funding mix in core markets, the report added. Fitch has further forecast lower oil prices and interest, which could drive issuance in 2024 and 2025.

(Writing by Bindu Rai, editing by  Daniel Luiz)