Sukuk issuance volumes will not grow significantly in 2022 as global interest rates rise and funding needs for Gulf economies fall, according to a report from S&P Global Ratings.
Global sukuk issuance fell marginally to about $147.4 billion from $148.4 billion in 2020, S&P said in the report.
Central bank interest rates tend to respond to moves from the US Federal Reserve, particularly those in the Gulf where currencies are pegged to the dollar.
“Amid a tight job market, accelerated inflation readings over the past few months, and increasingly hawkish forward guidance from the US Federal Reserve, we now expect three rate hikes in 2022, with the first expected in May,” the report said.
While sukuk issuance is likely to be subdued this year, the market is likely to grow in the long run, due to the increasing importance of environment and governance factors, it added.
Green and sustainability linked sukuk will continue to attract investors, S&P said. Energy transition policies adopted by Gulf countries as well as fresh fintech solutions will provide new opportunities for sukuk issuers.