Moody’s Forecasts Flat Sukuk Issuance in 2021
On September 7, 2021, Moody’s Investors Service projected that global sukuk issuance would be flat or slightly lower for the year, ending a streak of five consecutive years of growth. The rating agency attributed the slowdown primarily to higher crude oil prices, which eased financing requirements for oil‑rich Gulf states. In the first six months of 2021, total sukuk volume rose 3 % to $102 billion.
The increase was driven by strong activity in Malaysia and Indonesia. Conversely, issuance from the Gulf Cooperation Council fell 19 %, while Southeast Asian volumes climbed 22 %.
The decline in GCC sovereign sukuk was identified as the main factor restraining overall growth. Moody’s noted that Brent crude had recovered to roughly $72 per barrel, about double the low seen in March 2020. Higher oil prices have alleviated budget pressures for Gulf governments, reducing their need to tap debt markets.
As a result, sovereign and quasi‑sovereign borrowers in the region, many of whom had expanded borrowing during the pandemic, cut back sharply. Issuance in the United Arab Emirates and Bahrain dropped 65 % to $4 billion in the first half, reflecting the steepest retreat among sovereign and quasi‑sovereign issuers.
Malaysia and Indonesia continued to dominate the sukuk market. Moody’s cited their “continued large financial needs” as the primary driver of strong issuance from the region. Southeast Asian issuance grew 22 % in the first half, accounting for an expanding share of the global total.
Both countries have maintained active borrowing programmes to fund infrastructure and social spending. Malaysia, the world’s largest sukuk market, uses Islamic bonds to finance its budget deficit, while Indonesia has broadened its sukuk programme to attract foreign investors seeking Sharia‑compliant assets.
Corporate sukuk issuance picked up in the first half, partially offsetting the sovereign decline. Moody’s observed that stronger activity in the corporate sector was “partly offset by the reduced issuance from GCC governments.” Notable developments included Saudi Aramco’s debut in the sukuk market in 2021 and the Maldives’ first‑ever sukuk offering. These new entrants helped widen the investor base. Moody’s projected total sukuk issuance for 2021 to fall between $190 billion and $200 billion, down from the record $205 billion achieved in 2020.
The agency added that “Acceleration in the issuance of instruments like green sukuk, new issuers and low penetration will bolster the volume.” It expects the sukuk market to resume its long‑term growth trajectory as more issuers and innovative products emerge.
