Economy
Türkiye, Istanbul boast ‘huge’ potential for Islamic economic system
Türkiye and its metropolis, Istanbul, have major potential in the Islamic economic landscape, according to Yousef Khalawi, secretary-general of the AlBaraka Forum for Islamic Economy, citing the diversified economic base, strategic geography and institutional development.
Türkiye’s ambitions took clearer shape last week when officials used a major summit to portray the country’s potential to be a leader in shaping a more integrated, innovation-driven Islamic financial system.
“Türkiye has a great potential, basically because it represents a real, full and comprehensive economy,” Khalawi told an interview with Daily Sabah on the sidelines of the 2nd Global Islamic Economy Summit.
But its advantages lie in the diversity of its economic foundations, he noted.
Those foundations, according to Khalawi, include a strong agricultural sector, a well-developed industrial base, and competitive advancements in services, technology and tourism.
The summit was organized by the AlBaraka Forum for Islamic Economy at the Istanbul Financial Center (IFC), a sprawling development the Turkish government hopes will transform the city into a financial bridge between East and West – and between the conventional and Islamic financial systems.
Khalawi stressed macroeconomic challenges such as inflation and currency volatility, but highlighted Türkiye as a rare example of a Muslim-majority nation with such infrastructure.
“The issue is just that challenges: inflation, foreign exchange rate, but besides that, you have a full economy,” he noted.
“When you consider that as part of the Islamic world, you would have only just a few examples like that. So Türkiye comes on top,” he said.
“For this reason, there is a huge potential.”
Khalawi went on to call Istanbul “one of the top business cities in the Islamic world,” saying that the metropolis “comes in the middle of the world with its own heritage, and with its great expected future.”
“With the potential and with having also the Istanbul Financial Center, with the launch of their (Türkiye’s) first national strategy for Islamic finance, all that will lead anyone to Istanbul,” he noted.
Istanbul is now one of three host cities of the AlBaraka Forum’s flagship summits – alongside Medina, where the forum began in 1981, and London. Plans for a fourth summit in the Far East are underway, according to Khalawi.
‘Lots to be done’
Despite years of steady growth, Islamic finance continues to represent only a small fraction of global financial markets.
Khalawi said a lack of public communication, innovation, regulatory clarity and liquidity tools hampers progress.
“Building the system based on the Islamic banking system is one of the reasons. Most of our experts, and most of the investment, have focused on Islamic banking,” he said.
“Innovation is another issue. Regulatory framework is a third issue, and for example, till now, Islamic banks have hosted their liquidity where? In central banks. And central banks gave them interest, which is impermissible under Islamic law. This will immediately affect your profitability,” Khalawi explained.
“So, until we create an alternative instrument to manage the liquidity, you will always be affected badly by that.”
There are lots that needs to be done, Khalawi said.
Publicity is a part of that, and for this reason, he noted, the forum has been working for over a year on what Khalawi described as “a strategic framework for communication in Islamic economy,” with plans to launch it next year at the Istanbul Financial Center.
Untapped potential
Khalawi also referred to the untapped economic potential given the Muslim world’s demographic weight.
“What’s the number of Muslims across the globe now? We are almost 25% (of the global population). What are the numbers reflecting the volume of their economic impact? It’s still very low compared to 25% of the population,” he noted.
Addressing the summit last week, President Recep Tayyip Erdoğan Erdoğan also emphasized the Muslim world’s underperformance, urging for greater intra-Islamic cooperation in trade, finance and investment.
“Muslims account for 25% of the world’s population, yet Islamic finance assets total only about $2.5 trillion,” Erdoğan said.
“The Organisation of Islamic Cooperation (OIC), which is the largest international organization after the United Nations, consists of 57 member countries. However, their share in global trade is only around 11%,” he noted.
“In terms of population, we represent 25% of the world, yet our contribution to the global economy is approximately 9%.”
Beyond banking, finance
Khalawi went on to emphasize that the Islamic economy should be viewed beyond the narrow lens of banking and finance.
“When we talk about Islamic economy, we talk about it as a holistic system … it covers everything, including what they call today the socio-economy,” he said.
He dismissed the notion that Islamic finance should be viewed merely as an alternative to the conventional banking system.
“Islamic economy is not something new. The new is the modern Islamic economy, which started like five decades ago through Islamic banking. But the rest of the ecosystem of Islamic economy is much more beyond that, and it’s working now for almost 14 centuries.”
Asked whether the Islamic economy offers solutions to today’s global economic challenges, Khalawi said, “Theoretically, yes. Practically, we still miss strong innovations.”
He explained that while the philosophical and theological underpinnings of Islamic economy are robust, rooted in the Quran, Sunnah and centuries of history, today’s practitioners must adapt these principles to modern economic realities.
“The ecosystem of the economy has been changed … You cannot just implement that experience today.”
This adaptation, he said, requires investment in capacity building.
At this year’s summit, three workshops addressed critical issues: sukuk (Islamic bonds), the halal sector, and the Islamic economy’s growth potential fueled by the global Muslim population.
“So when leaders understand that potential, they will invest more in developing more products and areas,” Khalawi said.
Investors are buoyed by a political change in Hungary and are banking on a positive new chapter for the Central European nation as incoming Prime Minister Peter Magyar insists there is no time to waste following his resounding defeat of Viktor Orban – provided he can stick to his plans.
Magyar’s landslide win gives his center-right Tisza party the chance to change the judicial, electoral, public tendering and media control laws that were at the heart of Orban’s fractious relationship with Brussels and led to around 18 billion euros ($21.2 billion) of EU funding being withheld.
During a marathon post-victory press conference, Magyar, who wants to use the money to boost the economy, pledged to carry out sweeping reforms, join the European Public Prosecutor’s Office, set a two-term limit for prime ministers and unblock a 90 billion euro EU loan for Ukraine.
For economists, the implications are obvious – the unfreezing of EU funds alone, which amount to some 8% of Hungary’s annual gross domestic product (GDP) – could add 1-1.5 percentage points to its growth, Morgan Stanley estimates.
For international investors, who can pick and choose where they put their money, that and the broader change in mood music would be a significant lift.
“It’s a new chapter for Hungary, and it’s a great opportunity,” PGIM’s head of emerging market macro research, Magdalena Polan, said about the change of government.
“To move the economy will not take much because sentiment and rule of law are such an important part of the economic set of factors that impact growth.”
Analysts at JPMorgan expect a reset in relations with the EU to take place almost immediately and say early commitments to reform are likely to be enough to start unlocking the frozen EU money.
EU Commission President Ursula von der Leyen hailed Magyar’s win as “a victory for fundamental freedoms,” comparing the ousting of nationalist Orban to Hungary’s 1956 anti-Soviet uprising and its 1989 break with communism.
Although the mid-year deadline for Budapest to absorb the EU’s post-COVID Recovery and Resilience Facility (RRF) funds looks too tight on the face of it, JPMorgan also believes the “extraordinary circumstances will call for exceptional flexibility” from the EU.
Skeletons in the coffers
The election result sent Hungary’s forint surging to its best level against the euro in four years, while 10-year Hungarian government borrowing costs fell by half a percentage point to their lowest since 2024, and the stock market gained almost 5%.
Once the initial excitement settles, though, investors will want to see what Tisza says about state finances after they have had a proper look at the books.
Hungary currently has one of the EU’s largest budget deficits at over 5% of GDP. Its debt-to-GDP ratio is above 70% and rising, and credit rating agency S&P Global has the country just one downgrade away from “junk” status.
Magyar has said he hopes stronger growth and an improvement in sentiment that lowers the government’s borrowing costs further will help the situation. He also vowed to stamp out corruption, end “prestige” investment projects and halt overpriced public procurement.
“I’m sure they will find some skeletons,” Aberdeen EM debt portfolio manager Viktor Szabo said, referring to Tisza’s audit of the finances, although he also expects S&P to stabilize Hungary’s credit rating given the likely unfreezing of EU funds.
The other key to-dos on the new government’s list will be a credible medium-term budget plan, Szabo said. One needs to be presented to the European Commission by October, but an outline of the plan and some ad-hoc measures might be required well before then.
New beginnings, old realities
Euro adoption is also on the agenda, even if still years away.
It was a key pledge of Magyar’s election campaign, and Tisza’s supermajority should allow it to push through all the required constitutional changes.
Still, Deutsche Bank analysts say the country’s “fiscal and debt dynamics remain incompatible with Maastricht criteria at the moment,” given a eurozone entry requirement to have a sub 3% of GDP budget deficit and a debt-to-GDP level of 60% or lower, or at least reducing towards it.
Hungary’s 3% (+/-1pps) inflation target also needs to be brought in line with the “close-but-below” 2% preferred level of the European Central Bank (ECB), they said.
PGIM’s Polan also sees some broader economic and political realities remaining in place.
A sudden disbursal of EU funding before reforms are cemented could leave Brussels open to legal challenges from other potentially unhappy member countries.
Hungarian companies, meanwhile, are running into a labor shortage made worse by an aging population, language barriers and their approach to immigration. Living standard improvements haven’t kept up with some of its neighbors either, and ending reliance on Russian gas looks even harder for now, given the Middle East conflict.
Nevertheless, the departure of Orban means much is about to change, and most likely for the better for many investors.
“We are in a completely new situation here,” Polan said.
The International Monetary Fund (IMF) slashed its 2026 global growth projection Tuesday, as expected, warning that the world economy could be “thrown off course” by war in the Middle East, which hit commodity markets and sparked higher prices.
The global economy is set to grow by 3.1% this year, said the International Monetary Fund in its World Economic Outlook report, released during its spring meetings in Washington.
This is down from a 3.3% forecast in January before hostilities erupted as U.S.-Israeli strikes against Iran started on Feb. 28, prompting Tehran’s retaliation and sparking a broader conflict in the region.
“We were planning to upgrade growth for 2026 to 3.4%” if not for the war, IMF chief economist Pierre-Olivier Gourinchas told Agence France-Presse (AFP).
Prices of oil, gas and fertilizers have surged due to the conflict, as Iran virtually blocked traffic through the Strait of Hormuz, a key waterway for shipments. U.S. President Donald Trump has also ordered a naval blockade around Iran’s ports.
Higher inflation
The fund expects higher inflation this year at 4.4%, 0.6 percentage points above its January forecast.
After this, the “disinflation path” of the past few years should reassert itself, Gourinchas said.
But these projections assume a relatively short-lived conflict with temporary energy market disruptions.
“We have to be very concerned about the potential for this to become a major energy crisis,” he warned.
In more adverse scenarios where energy prices remain steep for the year, global growth could slow to 2.5% or even to around 2.0%.
“Since 1980, it’s basically been four times when growth has been at two percent or below,” said Gourinchas.
These included periods such as the 2008 global financial crisis and the COVID-19 pandemic.
“This latest shock comes less than a year since the shift in U.S. trade policies, and the transition to a new international trade system is still ongoing,” the IMF said.
A year ago, Trump unleashed sweeping tariffs on U.S. trading partners, rocking financial markets and snarling supply chains.
A swath of these tariffs has been struck down by the Supreme Court, but uncertainty lingers as Trump moves to reimpose duties via other means.
Uneven impact
Although overall revisions to global growth and inflation appear modest, the IMF cautioned that the war has taken a bigger toll on the Middle East and “vulnerable economies” elsewhere.
“The impact on emerging market and developing economies would be almost twice that on advanced economies,” the fund said.
Higher energy and fertilizer costs could bring steeper food costs, mainly hitting low-income energy importers, Gourinchas said.
Growth projections this year for the Middle East and central Asia were cut by around half to 1.9%.
Saudi Arabia, the Middle East’s biggest economy, is set to see 3.1% growth this year, down 1.4 percentage points from January’s expectation.
Among the world’s two biggest economies, U.S. growth is still set to accelerate to 2.3% this year, although the pace of growth was revised slightly lower.
“The U.S. at the margin is benefiting from higher energy prices,” Gourinchas said. But gasoline prices have also jumped for consumers.
China’s growth is anticipated to cool to 4.4%, a touch below the January forecast, too.
The IMF flagged an underlying “unevenness” in both economies.
Domestic activity lags behind exports in China, while a strong showing in the United States has been accompanied by low employment growth.
Euro area growth was revised 0.2 percentage points down to 1.1% for 2026.
U.K. growth saw a bigger downshift by 0.5 percentage points, to 0.8% this year.
While the IMF does not expect inflation expectations to go off-track, there is concern that they may not be as well-anchored as before.
Past inflation episodes remain fresh in the public’s minds, and firms might act to restore margins more quickly than before.
“If that happens, then you can get much more persistent inflation going on, that would be reflected in higher inflation expectations,” Gourinchas said.
If so, central banks might need to step in and raise interest rates to cool the economy, despite the ongoing negative supply shock.
China’s exports slowed down sharply in March as the war in the Middle East led to a rise in energy and transportation costs, hurting global demand and exposing the risks in Beijing’s strategy of leaning on manufacturing to sustain growth.
The world’s second-largest economy surged into 2026 on red-hot AI-fuelled electronics demand, raising expectations it could eclipse last year’s $1.2 trillion record trade surplus.
But the conflict has disrupted global growth, leaving China especially vulnerable as it has relied on foreign demand to offset a prolonged inability to revive consumption at home.
Outbound shipments grew by just 2.5% in March, customs data showed on Tuesday, a five-month low, and far below the 21.8% surge seen over the January-February period. Economists had forecast growth of 8.3% in a Reuters poll.
“Export growth to major destinations slowed across the board,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management, attributing the drop to global uncertainty over the Iran war.
“I think China’s trade surplus will shrink this year, as China cannot pass through the higher energy prices completely to foreign consumers,” he added.
The signs are already evident: China’s March trade surplus came in at just $51.13 billion, far below expectations of $108 billion.
Surge in imports
A sharp 27.8% surge in imports – the strongest since November 2021 – weighed on the balance. That compared with a 19.8% increase in January-February and forecasts for 11.2% growth.
China’s status as the world’s largest manufacturer and energy importer leaves it acutely exposed to a global energy shock. Diversified supplies and large oil reserves offer some protection, but uncertainty over the conflict’s duration risks undermining artificial intelligence-fuelled demand for chips and servers, blurring the growth picture.
Even China, long criticized by trading partners for subsidy-backed, cut-price manufacturing, is not insulated from the hit to buyers’ purchasing power as fuel and transport costs rise.
Separate gross domestic product (GDP) data due on Thursday is expected to show the $19 trillion economy regaining some momentum in the first quarter, but full-year growth is set to slow to 4.6% from last year’s 5.0%, broadly in line with the official target of 4.5%-5.0%.
Chinese goods more competitive?
Chinese goods will be “even more competitive” as the energy shock “pushes up the price in most of the countries” more than in China, said Chen Bo, senior research fellow at the National University of Singapore’s East Asian Institute.
Chen expects global demand for Chinese-made electric vehicles to increase.
Fred Neumann, HSBC’s chief Asia economist, said China could stand to benefit from taking the decision in the early 2000s to stockpile commodities, as it could help blunt the impact of raw-material shocks on factory gate prices.
China’s exports of refined oil products rose 20.5% month-on-month, totalling 4.6 million metric tons.
Disruptions to global energy supply lines will be felt in China, even if it’s not yet showing up in the data.
Natural gas imports for March dropped by an annual 10.7%, the lowest level since October 2022, with Chinese ships diverting between eight and 10 cargoes over the course of the month to sell where prices are higher, according to ICIS, Kpler and Vortexa data.
Crude oil imports also fell 2.8% year-on-year, but this was predominantly due to a high base effect, with March arrivals having been loaded onto ships before the war began.
The figures were further muddied by the seasonal effects of a late Lunar New Year national holiday, said Xu Tianchen, senior economist at the Economist Intelligence Unit, during which factories shut as workers down tools to celebrate.
“This explains the decline across the low-value-added sectors, textiles, garments, bags, toys, furniture, as they are reliant on migrant workers,” Xu said.
A high base is also a drag, after Chinese factories rushed shipments a year earlier to beat U.S. President Donald Trump’s April 2 “Liberation Day” tariff deadline.
March factory activity data out of China showed goods exports continued to support growth, but the war in Iran weighed on sentiment as commodity prices rose sharply, lifting input costs.
Some analysts expect sustained tech demand to underpin Chinese exports.
“For Q1 as a whole, export growth rose to its highest level in four years,” said Zichun Huang, China economist at Capital Economics.
“Despite the energy price shock, exports should stay solid in the coming quarters, thanks to strong demand for semiconductors and green technologies.”
Danish pharmaceuticals giant Novo Nordisk, maker of the Ozempic and Wegovy anti-obesity drugs, announced Tuesday a “strategic partnership” with ChatGPT developer OpenAI to accelerate the development of new medications and bring them to patients faster.
Like other drugmakers, Novo Nordisk is banking heavily on artificial intelligence to test new treatments and vaccines and bring them to market faster for less money.
Novo Nordisk said the partnership would place it “at the forefront of AI transformation in health care and help the company bring new and better treatment options to patients faster.”
No financial details of the partnership were disclosed.
“This collaboration with Novo Nordisk will help them accelerate scientific discovery, run smarter global operations, and redefine the future of patient care,” OpenAI CEO Sam Altman said.
Pilot programs will be launched across several business areas “with full integration by the end of 2026,” the statement added.
Novo Nordisk has seen its share price slide as it has slashed prices to meet rising competition, particularly from its U.S. rival Eli Lilly.
It has also faced competition from copycat versions of Ozempic and Wegovy, and last month it took legal action against the U.S. telehealth chain Hims & Hers after it began selling so-called compounded versions of the injectable.
Currently, it can take more than a decade to develop a drug, and out of ten candidates, only one manages to reach the market.
According to industry analysts, the average research and development cost to bring a new drug to market is around $2 billion.
A U.S.-sanctioned tanker passed through the Strait of Hormuz on Tuesday despite a maritime blockade launched by the United States a day earlier in response to Iran’s refusal to reopen the narrow waterway that is vital for global oil trade.
U.S. President Donald Trump announced the blockade on Sunday after weekend peace talks in Islamabad between the U.S. and Iran failed to reach a deal.
The Rich Starry, an oil and chemicals tanker, left the Gulf via the Strait of Hormuz on Tuesday morning and is traveling in the Gulf of Oman, according to shipping traffic trackers Lloyd’s List and Marine Traffic.
The tanker and its owner Shanghai Xuanrun Shipping Co Ltd were sanctioned by the United States for dealing with Iran.
Rich Starry is a medium-range tanker that is carrying about 250,000 barrels of methanol, according to the data. It loaded the cargo at its last port of call, the UAE’s Hamriyah, the data showed.
The Chinese-owned tanker has Chinese crew on board, the data showed.
China’s Foreign Ministry said on Tuesday that a U.S. blockade of Iranian ports is “dangerous and irresponsible,” warning it would only aggravate tensions. It did not mention whether Chinese ships were passing the strait.
Since the United States and Israel began the war on Feb. 28, Iran effectively shut the Strait of Hormuz to all vessels except its own, saying passage would be permitted only under Iranian control and subject to a fee.
The fallout has been widespread, as nearly a fifth of the world’s oil and gas previously flowed through the narrow waterway.
In a countermeasure, the U.S. military began blocking shipping traffic in and out of Iran’s ports on Monday. Tehran has threatened to hit naval ships going through the strait and to retaliate against its Gulf neighbors’ ports.
Meanwhile, another two Iran-linked vessels were seen transiting the strait on Tuesday. Since they were not heading to Iranian ports, they are not covered by the blockade.
Panama-flagged Peace Gulf, a medium-range tanker, is heading to Hamriyah port in the United Arab Emirates, LSEG data showed.
The vessel typically moves Iranian naphtha, a petrochemical feedstock, to other non-Iranian Middle Eastern ports for export to Asia, Kpler data showed.
Prior to this, two U.S.-sanctioned tankers passed through the narrow waterway.
Handy tanker Murlikishan is heading to Iraq to load fuel oil on April 16, Kpler data showed. The vessel, formerly known as MKA, has transported Russian and Iranian oil.
The founder of China’s troubled Evergrande Group, the world’s most indebted property developer, pleaded guilty to several charges, including misuse of funds, fundraising fraud and illegally taking public deposits, a court in China’s southern city of Shenzhen said.
The company has defaulted since 2021 on most of its $300 billion in liabilities – a sign of troubles emblematic of China’s property sector woes that have long dragged on economic growth.
Founder Hui Ka Yan “pleaded guilty and expressed remorse” in trial proceedings on Monday and Tuesday against him and Evergrande, the court said in a posting on its official WeChat account.
The liquidators of Evergrande declined to comment on the case.
Reuters was unable to seek comment from Hui, 67, who has not been seen in public since Chinese authorities detained him in 2023, following the default of Evergrande.
Verdicts to be issued later
Hui and the company also face charges of illegally extending loans, fraudulently issuing securities and bribery by units, the Shenzhen Municipal Intermediate People’s Court added, with verdicts to be handed down later, though it did not set a date.
The company’s failure to repay billions of dollars of wealth management products unleashed frustration among the lower and middle classes, many of whom had investments wiped out, provoking protests and threatening social stability.
Jail for life and confiscation of property are the maximum penalties for illegal fundraising, while bribery can also bring life terms.
In 2024, China’s securities regulator fined Hui, formerly one of China’s richest men, $6.6 million and barred him from the securities market for life, after finding Evergrande’s flagship unit had inflated earnings and committed securities fraud.
A former steel technician, Hui, raised by his grandmother in a rural village in central Henan province, built his fortune on the back of low-priced homes.
After founding Evergrande in 1996, he turned it into China’s biggest property developer by contracted sales, aggressively taking on debt.
New ventures
He also did not shy away from new ventures, dabbling in electric cars and soccer, both a passion of Chinese President Xi Jinping.
In 2017, Hui was Asia’s richest man with a net worth of $45.3 billion, according to Forbes. By 2023, his net worth was estimated at $3 billion.
In 2024, Evergrande received a liquidation order from a Hong Kong court and was kicked off the Hong Kong stock exchange last year, bringing an end to a tumultuous boom-and-bust saga.
Outside mainland China, Evergrande’s liquidators have battled in court to freeze offshore assets of the founder and his ex-spouse in a struggle to claw back $6 billion in dividends and remuneration paid to Hui and other former executives.
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