Total sukuk issuance from GCC countries is forecast to reach $47.6 billion in 2019 according to ratings agency S&P Global Ratings. The figure is a slight increase on the previous year’s total of $46 billion and would amount to 41.6% of the total global sukuk issuance of $115 billion.
Saudi Arabia is expected to be the most prolific sovereign issuer of sharia-compliant bonds while the UAE, the second largest economy in the region, is forecast to see a slight drop in its issuance levels – $8 billion compared to $9.1 billion in 2018.
The forecast is dependent on a number of geopolitical uncertainties though, warns S&P, not least the fluctuating price of oil.
“If we are to see higher oil prices, GCC countries will have lower financing needs [and vice-versa]. Oil prices will be the key to how sukuk markets performs,” said Mohammed Damak, senior director and global head of Islamic finance at S&P.
Another factor will be the ongoing effort to develop standard definitions for sharia-compliance, stated Damak citing the legal wrangle between Dana Gas and its creditors over the UAE-based energy company’s $700 million sukuk, a dispute which has rocked investor confidence and led some to exit sukuk products, said Damak.
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