S&P Global Ratings anticipates the robust growth in the UAE's Islamic finance sector to persist in the near future, bolstered by the solid performance of the non-oil economy. The agency reports a notable surge in foreign currency Sukuk issuance in the UAE since the start of the year, particularly in the real estate and financial institutions sectors, as part of efforts to attract more foreign capital.
The agency predicts that interest rate cuts will continue until the end of 2025, which is expected to stimulate global issuance growth. The UAE's insurance sector, encompassing both conventional and Islamic segments, is forecasted to grow by 15 to 20 percent, driven by economic performance and infrastructure projects. Sustainable finance is identified as a new avenue for funding, especially for oil-exporting countries aiming for carbon neutrality, with the UAE emerging as a significant market for sustainable issuances in the region.
Dr. Mohamed Damak, Global Head of Islamic Finance at S&P Global Ratings, noted that the global Islamic finance industry is experiencing significant growth, with total assets projected to reach $3.3 trillion by the end of 2023, marking an 8 percent increase from the previous year. He highlighted that all sectors related to Islamic finance have seen substantial growth, particularly Islamic banking in the Gulf Cooperation Council (GCC).
Damak also mentioned that despite challenges in some markets, Sukuk issuances stabilized during the first half of the year. S&P anticipates the sector to grow at a high single-digit rate through 2024 and 2025, driven by financing needs in key countries. The expected interest rate cuts by the US Federal Reserve by the end of 2025, including the 50 basis points cut in September, are anticipated to enhance market liquidity and boost Sukuk issuance.
Rawan Oueidat, Director at S&P Global Ratings, discussed the sustainable bonds and Sukuk market, emphasizing its challenges and opportunities. He forecasts that sustainable bond issuance, including green, social, and sustainability bonds, will stabilize at around $1 trillion this year. While Europe and the Asia-Pacific are expected to remain the primary markets for sustainable bonds, the Middle East's contribution will remain below 3 percent.
Emir Mujkic, Director at S&P Global Ratings, provided insights into the UAE insurance market's outlook and the prospects for Islamic insurers. He noted that Islamic insurance constitutes about 15 percent of the total insurance sector in the UAE. Both conventional and Islamic insurance sectors are projected to grow at a similar rate of 15 to 20 percent this year, influenced by favorable economic conditions, infrastructure investments, and price adjustments, particularly in medical and motor insurance.
Source link: https://www.khaleejtimes.com
