Following a period of stagnation triggered by the global financial crisis, world trade is set to return to a more normalized 8 percent y-o-y growth in trade in 2016, presenting fresh opportunities for businesses that have positioned themselves to benefit, a new study from HSBC Commercial Banking shows.
Exporters and importers in cyclical sectors, such as transport equipment and metals, will be the first beneficiaries as the pace of growth in cross- border commerce recovers to 8 percent in 2016 from just 2.5 percent last year, according to the HSBC Trade Forecast.
Looking further out to 2030, the forecast projects that global merchandise trade will more than triple as astute companies capitalize on increasing productivity and consumer wealth in the emerging markets.
“Businesses can’t afford to fixate on the risks posed by today’s geopolitical problems and uneven rates of growth at the expense of their future planning,” said Simon Cooper, Chief Executive of HSBC Commercial Banking. “Conditions have undoubtedly been tough for trade recently, but we are now turning a corner."
Cooper notes that the medium and long term prospects look significantly better for businesses that have prepared themselves for recovery in both developed and developing markets.
Increasingly robust economic conditions in the US and the UK, along with a gradual rebound in the Eurozone, will give many international businesses a platform on which to build during 2015.
In the short term emerging markets growth looks more vulnerable – while still rapid in relative terms – reflecting a combination of structural challenges and political uncertainties in Eastern Europe and the Middle East.
By 2030, however, China is expected to increase its overseas shipments five-fold as it strengthens commercial ties to emerging Asia, the Middle East and North Africa.
China currently exports 1.4 times more goods than Germany and the US by value, and will widen this gap to almost three times US exports.
India, meanwhile, is likely to be the world’s fastest-growing exporter from 2014 to 2030, and has the potential to move from the 14th largest exporter of goods by value to the world’s 5th largest.
The Rise and Rise of India’s Global Trade
New Prime Minister Narendra Modi recently outlined a roadmap of structural reforms for India’s economy in his first budget announcement; reforms HSBC expects will help the country boost its goods exports more than five-fold by 2030, at an average rate of 11 per cent a year.
India’s exports are currently dominated by goods at the lower end of the value chain, including mineral fuels, textiles and jewellery.
Looking ahead, however, HSBC forecasts more capital and skill-intensive sectors like pharmaceuticals and automobiles will emerge as major contributors to overall exports.
The forecast predicts that the UAE will become the leading destination for India’s exports by 2030. With the UAE’s expanding role as a re-exportation hub, this indicates a shift in the shape of future trade. India will also increasingly look east for export opportunities.
At the same time, India’s rapidly expanding consumer classes will present an enticing export opportunity for the rest of the world’s producers. By 2030, HSBC predicts that India’s imports will increase nearly five-fold.
China is expected to capitalize most on the growing Indian market, expanding exports to the country more than nine times over and maintaining its position as the world’s leading exporter of goods to India.
The US, meanwhile, will edge up from 5th position to 4th place, more than tripling its exports to the country in the same period.