Saudi Arabia-led Gulf Cooperation Council (GCC) and Southeast Asia will drive sovereign sukuk issuance volumes to exceed 2023, Moody’s Ratings said in a new report.

“We expect global sukuk issuance volumes in 2024 to exceed 2023 and range between $200 and $210 billion, up from just under $200 billion,” the report said.

While issuance activity may slow in the second half of the year, it will remain strong in GCC countries as the regional governments continue to pursue strategies to diversify their economies away from oil.

In the first half of 2024, GCC sukuk issuance rose 138% year-on-year to $69.2 billion, with Saudi Arabia accounting for 37% of the total.

Issuance in the UAE doubled to $8.6 billion year-on-year, while Qatar saw a 258% increase, reaching $4.57 billion. Rising financing needs in Oman and Bahrain also contributed to the growth in issuance.

GCC corporate and bank issuance volumes jumped to a combined $19.6 billion in the first half of 2024, up from $11.6 billion a year earlier.

Corporate issuance rose to $9.6 billion from $6.9 billion last year, which is expected to remain strong in the second half of the year, the report said.

GCC companies dominated early 2024 dollar-denominated corporate sukuk issuance, driven by high demand and market scarcity

The Saudi government refinanced some 2024, 2025 and 2026 maturities in the first half by issuing $17 billion of new longer-dated sukuk.

“We expect it to continue to prefinance maturities,” the ratings agency said.

Moreover, ESG issuances hit a record $10.6 billion last year and are expected to grow this year.

ESG sukuk volumes were $6 billion in the first half of the year, driven by issuance from the UAE, Saudi Arabia and Indonesia.

“We expect continued growth in the ESG sukuk market thanks to strong investor demand and increasing interest from countries willing to diversify their funding base,” Moody’s stated.     

(Editing by Brinda Darasha; brinda.darasha@lseg.com)