The global sukuk market contracted 6% y-o-y in 2022 to USD154 bil, driven mainly by a drop in sukuk issuances from key market players, more specifically the GCC and Indonesia. In the GCC region, the Ukraine conflict resulted in supply chain disruptions, which led to higher oil prices. This, in turn, reduced funding requirements by GCC governments and consequently resulted in smaller sovereign sukuk issuances. Inflationary pressures, rate hikes throughout the year, and geopolitical tensions created an unfavourable economic environment for most global issuers. Despite these challenges, the global sukuk market performed relatively well considering the record number of rate hikes in 2022.
Malaysia and Saudi Arabia remained the two largest sukuk issuers, commanding 63% of total issuances in 2022. Sovereign sukuk continued to dominate, constituting 57.3% of total sukuk issuances. Corporate sukuk issuances staged a comeback in 4Q 2022, largely contributed by Malaysian corporates, after consecutive quarters of decline, showing promising signs of recovery going into 2023 as rates are expected to stabilise.
The green and sustainability sukuk market experienced a new high of US$8.1 bil in issuances in 2022 (2021: US$6 bil), unlike the broader global sukuk market. Demand was driven mainly by investors with ESG-centric investment mandates. This trend is expected to continue into 2023 as the current supply of ESG Shariah-compliant issuances falls short of demand. A notable issuance during this period included Dubai Islamic Bank’s US$750 mil sustainable sukuk in November 2022.
