Moody’s has depicted a bleak outlook for sukuks in the current year because of a spike in oil prices and lower financing needs in the GCC.
However, the risk assessment firm expects Islamic finance to grow even more in 2022 as economic recovery continues in the GCC.
“The economic recovery in key Islamic finance markets will boost credit growth and demand for Shariah-compliant products, and we expect Islamic banks’ asset growth to continue to outperform their conventional peers,” said Ashraf Madani, vice-president and senior analyst at Moody’s.
With higher oil prices, a stronger economic recovery and lower sovereign funding needs in GCC and Indonesia, Sukuk issuance dropped 12 percent to $181 billion in 2021. Sukuk issuance activity is expected to further decline to $160-$170 billion in 2022, Moody’s has forecast.
Assets Under Management for Islamic funds increased by 31.9 percent to $140 billion in 2022. According to Moody’s, Islamic fund AUM continued to grow robustly in 2021 as the economy improved and equity markets performed well. AUM expansion is likely to continue beyond 2021 due to these drivers.
Health insurance demand is rising as more GCC, African, and Southeast Asian countries introduce compulsory health insurance, Moody’s said.