The global Islamic economy size may grow to $3 trillion in three years due to a growing Muslim demographic, according to Thomson Reuters’ State of the ‘Global Islamic Economy Report 2016/17’ seen by businessamlive.
The report indicated that Islamic economy has continued to evolve, driven by fast-growing Muslim population as well as young Muslims asserting their values, and requiring companies to provide products and services that meet their faith-based needs.
It specifically projected that the Islamic economy would be worth $3.0 trillion by 2021 three years from now, about 58 percent leap from the $1.9 trillion worth in 2015.
In the same vein, it saw Islamic finance assets rising to $3.5 trillion during the period from the $2.0 trillion level in 2015.
“In 2016 the major growth drivers of the Islamic Economy mostly remain the same with only the nature of some of them, having evolved,” the report said, adding that there are four major global market drivers and four major Islamic market-based drivers that continue to shape the growth of the identified Islamic Economy sectors.
It, however, identified the four key Islamic market-based growth drivers as large young and fast-growing global Muslim demographic, Large and fast-growing global Islamic economies, Islamic ethos/values increasingly driving lifestyle and business practices, and OIC economies growing Islamic/Halal market development focus.
“One of the strongest drivers for the continued growth of the Islamic Economy sectors is the fast-growing, young, and large Muslim population worldwide. The global Muslim population is expected to rise from 1.7 billion in 2014 to 2.2 billion by 2030 (26.4 percent), according to Pew Research Center’s Forum on Religion & Public Life,” it said.
The Pew study is said to have projected Muslim population globally to grow at about twice the rate of the non-Muslim population over the next two decades — with an average annual growth rate of 1.5 percent for Muslims, compared with 0.7 percent for non-Muslims.
“By 2030, 29 percent of the global young population (15-29) is projected to be Muslim. Despite the significant economic challenges (job creation, training, social services. etc.) this demographic trend presents its economies, it also reflects the significant proportion of a young consumer market and an entrepreneurship engine.”
The report indicated that 57 mostly Muslim-majority member countries of the OIC had a GDP (PPP based) in 2015 of $17 trillion, which represented 15 percent of the total global GDP (PPP based) of $113 trillion in 2015.
“Even in a climate of slow global economic growth, these economies are growing at a faster rate than the global economy. Based on the latest IMF growth projections (April 2016), the average projected growth of the OIC markets between 2015-21 is expected to be 4.19 percent compared to the rest of the world’s GDP growth, averaging 3.6 percent during that same period, with 21 of the OIC countries projected to have a higher growth rate than IMF’s ‘emerging market and developing economies’.”
However, a notable development is that the fastest growth OIC economies are demographic rich industrial OIC economies such as Indonesia, Bangladesh, Pakistan, Uganda, Malaysia, rather than oil-dependent countries OIC growth economies
The authors of the report highlighted that Islam as a ‘way of life’ for many Muslims has continued to guide all aspects of their lives, including their consumption behavior, adding that the practice and adherence to Islam varies greatly among Muslims based on their age group, geographic region/ country, cultural influences and other factors.
Nevertheless, the number of Muslims identifying and adhering to Islam is quite high. According to a 2015 Pew Global Attitudes survey of select 42 countries, 83 percent of respondents from Islamic countries considered “religion as very important in their lives.” Comparatively, only 21.5 percent from European countries said the same while the percentage was higher at 53 percent in the U.S.
On the role of OIC the report claims that as the Islamic Finance sector matures across most OIC member countries, many OIC governments have launched initiatives that expand into other Halal market sectors. While the earlier driver of the Islamic Development Bank led effort to increase intra-OIC trade (modest growth of 15.5 percent in 2005 to 19.8 percent in 2015) and contribute to the Halal/Islamic sector development, it is the recent focus on the various sectors of the Halal/Islamic Economy that is now a major driver.
Other factors for the growth include developed economies seeking growth markets and participation of global multinationals as top global brands from food, finance, fashion, travel, pharmaceuticals and cosmetic sectors continue to not only engage in the Halal/Islamic Economy space but are helping innovate products and services given their global R&D and marketing capabilities.
For example, major global food suppliers such as BRF from Brazil to top global food processor Nestle, to top retailers Carrefour, Walmart, and Whole Foods have all significantly engaged in the Halal Food market.
Equally, Mastercard has launched a Halal benefits program for its Shariah-compliant cardholders in Southeast Asia. In travel, many major hotel operators (IHG Group, Marriot, Fairmont) among others are ensuring they create experiences that fit some of the unique requirements of Muslim leisure travelers.
“Their engagement continues to drive global credibility and boost Islamic Economy sectors,” the report said.