Tradewinds

Emerging Markets Still Growing

March 1, 2014
KEYWORDS global trade
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Growth opportunities offered by emerging markets outweigh concerns about the political and economic turmoil that rattled some developing countries in 2013.

Logistics professionals view prospects for emerging markets as “good” or “very good” for 2014. Nearly three quarters of respondents to an annual survey remain optimistic despite signs that growth is slowing in China, stalled in Brazil and India, and uncertain in other countries that could suffer if the United States reins in monetary stimulus, as expected.

The logistics industry’s optimism comes despite moves by the International Monetary Fund and the Organization for Economic Cooperation and Development to cut 2013-2014 global growth forecasts, citing concerns about emerging markets. Emerging markets currencies and financial markets came under pressure in 2013 amid worries of a possible ripple effect from tighter U.S. monetary policy.

The 45 countries featured in the 2014 Agility Emerging Markets Logistics Index were projected to grow at an average of 6.2 percent in 2013. The U.S. economy expanded 2.9 percent, while the European Union grew 1.4 percent, according to IMF projections.

The industry’s confidence in emerging markets shows that logistics executives take a long view and see beyond today’s headlines. In the past, currency pressures, investor jitters, political instability or a pause in growth was a major setback that undermined confidence about other emerging markets. This time, the industry is staying focused on the enormous potential of emerging markets.

Among the largest emerging economies, no country has improved its position in the Emerging Markets Logistics Index as much as Saudi Arabia, which climbed to Number 3 in the 2014 Index from No. 9 five years ago. Saudi Arabia is in the midst of an unprecedented public spending binge, building and expanding airports, roads, ports, universities, industrial complexes and other infrastructure in an effort to diversify, lessen dependence on oil, and create jobs for millions of young Saudis.

Qatar and Oman — joined by Chile — make up an elite group in the Index. They are relatively small economies (annual GDP of less than $300 billion) that outperform both their peers and larger emerging economies based on the strength of their accessibility, their vibrant service sectors and world-class transportation infrastructure.

Twelve of the 13 countries ranking worst in the area of Market Compatibility were African and Latin American countries.

Logistics industry executives are pessimistic about a quick return to stability and growth in Arab Spring countries Egypt, Libya and Tunisia. Nearly two thirds say the economic attractiveness of Arab Spring countries is “in question for the foreseeable future” or “significantly weakened in the long term.”

Industry executives see widely varied threats to the supply chain, depending on the region. They ranked natural disasters the biggest risk in Asia; corruption the most serious threat in Latin America; government instability the top problem in the Middle East and North Africa; and poor infrastructure the most serious risk in Sub-Saharan Africa.

 Most logistics executives (72 percent) expect “modest growth” in global economic output and trade volumes in 2014, up from 46 percent a year ago. 

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