For millions of people in Malaysia, Indonesia, and Turkiye, the shift in the global sukuk market is set to have a significant impact on their daily lives. As these countries are poised to become the largest sovereign sukuk issuers, the effects will be felt in local communities, from businesses to households. The increased sukuk issuance will likely lead to more investment opportunities, job creation, and economic growth, ultimately changing the lives of many individuals and families.
The prediction comes from Moody’s Investors Service, which forecasts that Malaysia, Indonesia, and Turkiye will overtake Saudi Arabia as the leading sovereign issuers in 2023-2024. This change is largely driven by the countries’ modestly reducing budget deficits and increased refinancing needs.
Moody’s anticipates that Malaysia and Indonesia will contribute the most to this shift, with Malaysia’s fiscal deficit expected to decrease to roughly 5% of the gross domestic product (GDP) in 2023-2024 from 6% in 2022.
Economic Implications
The reduced fiscal deficit in Malaysia is still expected to be large enough to support annual sovereign sukuk issuance of US$20bil-US$22bil (RM90.4bil-RM99.5bil) in both 2023 and 2024. This is partly due to the incoming administration of Prime Minister Datuk Seri Anwar, who is likely to maintain large fiscal deficits through 2024 to support economic recovery. With approximately half of the gross government financing to be satisfied by sukuk issuances, Moody’s expects reasonably high levels of gross sukuk issuance to be maintained.
In addition to the economic implications, the development of Islamic finance is also a key factor in the growth of the sukuk market. Prime Minister Datuk Seri Anwar unveiled a number of policies in his first Budget 2023, presented on February 24, 2023, to encourage further development of Islamic finance.
These policies are expected to contribute to the growth of the sukuk market and solidify Malaysia’s position as a leading issuer.
Regional Impact
The shift in the global sukuk market will not only have an impact on the individual countries but also on the region as a whole. As Malaysia, Indonesia, and Turkiye increase their sukuk issuance, it is likely to attract more investment and attention to the region. This could lead to increased economic cooperation and integration among the countries, ultimately benefiting the people and communities in the region.
Furthermore, the growth of the sukuk market is also expected to have a positive impact on the environment and conservation efforts. With the increased focus on Islamic finance, there is a growing emphasis on responsible and sustainable investing.
This could lead to more investment in clean energy, conservation, and sustainable infrastructure, ultimately contributing to a cleaner and healthier environment for future generations.
Looking Ahead
As the sukuk market continues to grow and evolve, it will be important to watch how the shift in the global market affects the people and communities in Malaysia, Indonesia, and Turkiye. With the expected increase in sukuk issuance, it will be crucial to monitor how the funds are being used and what impact they have on the local economies and environments. As the region continues to develop and grow, it will be essential to prioritize responsible and sustainable investing, ensuring that the benefits of the sukuk market are shared by all. In the coming months, it will be important to watch for further developments in the sukuk market and how they affect the people and communities in the region, as well as the global economy as a whole.
