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Wednesday, 15 January 20
PREDICTIONS FOR 2020: 'SLOWBALISATION" IS THE NEW GLOBALISATION - PWC
 Projecting what the future holds is an important exercise for businesses looking to plan ahead. Below we present a summary of some of the themes we assess will likely prevail in the global economy in 2020.
Trading goods across borders will likely remain tense…: A defining feature of the global economy since at least the 1970’s has been globalisation—the bringing together of economies predominantly via more liberal trade flows. The global volume of merchandise traded slowed down dramatically and even went in reverse in 2019 in contrast to a 21st century average growth rate of about 3.4% per annum*. Also, in December 2019 the World Trade Organization’s (“WTO”) dispute settlement mechanism was effectively disbanded. We expect this trend to continue in 2020 and for trade tensions in the global goods market to persist. This means that we assess globalisation is likely give way to ‘slowbalisation’ i.e. continued integration of the global economy via trade, financial and other flows but albeit at a significantly slower pace. Large businesses with sophisticated supply chains spread across the world should therefore plan for a variety of scenarios, some of which have not been experienced in recent history.
…but global services trade expected to hit US$7 trillion: One aspect of trade that is often neglected is trade in services, which is now about one third of the size of the global volume of merchandise trade. In contrast to goods, services remain largely unaffected from tariff wars. The latest 2018 data from the International Trade Centre (“ITC”) shows that the global export of services was worth about US$5.8 trillion, or around 3.5% of global GDP. We expect the total value of services exported to hit a record US$7 trillion by 2020. Assuming historic trends continue, the US and UK are likely to remain the first and second largest exporters of services in the world in US Dollar terms. But in yet another reminder of the shift of the centre of economic power from the West to the East we expect China to overtake France in 2020 and become the world’s fourth largest services exporter.
Global economy is expected to grow at a modest pace: Figure 1 shows that growth in merchandise trade flows and the global economy have been intrinsically linked. In our main scenario for 2020, we expect the global economy to expand at a rate of around 3.2% in purchasing power parity (“PPP”) terms which is below the 21st century average of 3.8% per annum. In our main scenario, we expect all of the major economies to grow, buoyed, in part, by accommodative financial conditions. US economic activity is likely to expand by around 2%, in line with its potential rate. Given the historically low unemployment rate, US employers, however, find it increasingly difficult to hire staff. Across the pond, the Eurozone is expected to grow at approximately half that rate (i.e. around 1%). Germany, and other economies that are sensitive to global trade flows, to become more reliant on household consumption as a source of growth instead of net exports and investment. For Germany, however, this could be challenging as households tend to save more than the European average. In the emerging world, we expect the Chinese economy to expand by less than 6%– but it can still add the equivalent of Saudi Arabia to the world economy in one year. The world’s six other largest emerging economies, including Turkey, should also grow in this scenario, with India leading the way.
Predictions for 2020
More jobs across the board but not necessarily spread equitably
We expect the G7 to continue to create jobs, to the tune of around 2 million. Four out of the five new jobs in the G7 will be created in the US, UK and Japan. As the pool of labour resources in the G7 gradually dries up, we assess earnings should continue their upward trajectory. But in the absence of productivity improvements, corporate profit margins could be squeezed. Similarly, the International Labour Organization (“ILO”) expects the seven largest emerging economies– the E7–to create about 8 million jobs in net terms. There are some exceptions to this– Russia and China are likely to experience a shrinking workforce because of demographic pressures. Finally, the ILO’s employment projections for the G7 show that jobs are likely to be taken up by men and women in equal measure. Within the E7, however, the ILO expects job creations to be less evenly distributed across genders.
India expected to rise in global economic rankings
According to the IMF’s latest estimates, 2019 was the year when India overtook the UK and France to become the fifth largest economy in the world. This is an ongoing process with India likely on current trends to overtake Germany before 2025 and Japan before 2030 to become the world’s largest economy behind China and the US. France and the UK will likely now vie for sixth place in the rankings, with their relative position dependent on the value of the pound against the euro which may remain volatile in 2020.
Germany may need to choose between ‘lower for longer’ interest rates or higher fiscal spending
The US is expected to run a US$1.2 trillion government deficit. The Eurozone, which is about the same size as the US economy will run a government deficit about 1/10 the size of the US. In fact, we expect almost half of the Eurozone member states to run a government budget surplus in 2020. Cyprus, Luxembourg and Germany are expected to run the largest surplus relative to their economic size while France and Italy are expected to be on the opposite end of the spectrum with continuing budget deficits. Germany is likely to come under renewed pressure to either increase its government spending or accept ‘lower for longer’ interest rates (see Figure 3). Further afield, of the Gulf Cooperation Council (“GCC”) countries, we only expect Qatar to run a government surplus in 2020. This could mean more policy action in the future to balance government budgets across the GCC.
US oil production expected to hit record levels
Global renewable energy and nuclear consumption will likely make up more than 20% of global energy consumption, which is the highest it has ever been. The rise of renewable energy reflects how businesses, households and governments are adapting and changing their attitudes. China is expected to be the largest consumer of this type of energy closely followed by Europe. However, oil is expected to continue to remain the most preferred source of energy in 2020 for the world economy followed by coal and natural gas. The US and China will almost certainly remain the largest consumers of oil in the world in 2020. In so far as the extraction and supply of oil (and other liquid forms of energy) is concerned the US may surpass the monthly 13 million barrels per day (“b/d”) threshold. To set into context, in the US crude oil was extracted at a rate of 5.5 million b/d 10 years ago.
Global population biggest it has ever been but also the greyest
According to the United Nations (“UN”), In 2020, the world’s population is expected to reach 7.7 billion, which is around a 10% increase compared to a decade ago. China, India and SubSaharan Africa are expected to drive around half of the world’s annual population increase. At the same time, the number of people above the age of 60 globally is expected to surpass the one billion mark. China is expected to have a larger number of people above the age of 65 than all the six other largest emerging economies put together. This calls into question how policymakers respond to this trend and fund future health and social care. This could also be an opportunity for businesses in advanced economies, who have been dealing with such issues for decades. In relative terms i.e. the proportion of people above the age of 65 relative to the country’s entire population, Japan is expected to remain the ‘greyest’ country in the world and Niger is expected to be the youngest.
Source: PWC
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Friday, 23 February 24
STRONG OUTLOOK FOR THE TANKER MARKET IN 2024 AND BEYOND - DNV
Several factors have aligned over the past two years to create a robust and profitable market for tanker owners, which is expected to drive newbuil ...
Friday, 23 February 24
AUSTRALIAN COAL FLOWS TO ASIA HOVER ABOVE LAST YEAR’S VOLUME TONNES - SIGNAL GROUP
In the final days of February, the dry bulk freight market appeared to maintain a relatively stable momentum, particularly evident in the large ves ...
Friday, 23 February 24
RUSSIAN COAL SHIPMENTS FALL 14% AS SANCTIONS BITE - BIMCO
During the first seven weeks of 2024, Russian coal shipments have fallen 14% y/y. Volumes have gradually declined since October 2023 when logistica ...
Thursday, 22 February 24
BIMCO PUBLISHES SHIP FINANCING FORMS TO ENSURE UNINTERRUPTED USE OF SHIPS
BIMCO has published two standard Quiet Enjoyment Letters (QELs), the first standard form QELs available to the industry, to offer a tool that can e ...
Monday, 19 February 24
METALS INVESTMENT: THE DARKEST HOUR IS JUST BEFORE THE DAWN - WOOD MACKENZIE
Things often seem at their worst just before they get better. In terms of meeting our net zero 2050 scenario, we’ve reached a watershed momen ...
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- Bank of Tokyo Mitsubishi UFJ Ltd
- Central Java Power - Indonesia
- Bharathi Cement Corporation - India
- Kepco SPC Power Corporation, Philippines
- Commonwealth Bank - Australia
- Gujarat Electricity Regulatory Commission - India
- Sindya Power Generating Company Private Ltd
- The Treasury - Australian Government
- Karbindo Abesyapradhi - Indoneisa
- Mintek Dendrill Indonesia
- Bulk Trading Sa - Switzerland
- San Jose City I Power Corp, Philippines
- Semirara Mining Corp, Philippines
- Kohat Cement Company Ltd. - Pakistan
- ICICI Bank Limited - India
- Medco Energi Mining Internasional
- Indika Energy - Indonesia
- GMR Energy Limited - India
- Goldman Sachs - Singapore
- Jaiprakash Power Ventures ltd
- Vedanta Resources Plc - India
- Sical Logistics Limited - India
- Baramulti Group, Indonesia
- Central Electricity Authority - India
- Kumho Petrochemical, South Korea
- Aditya Birla Group - India
- Latin American Coal - Colombia
- Romanian Commodities Exchange
- Price Waterhouse Coopers - Russia
- Global Coal Blending Company Limited - Australia
- London Commodity Brokers - England
- Ministry of Transport, Egypt
- Port Waratah Coal Services - Australia
- MS Steel International - UAE
- CNBM International Corporation - China
- Kalimantan Lumbung Energi - Indonesia
- Simpson Spence & Young - Indonesia
- PowerSource Philippines DevCo
- Essar Steel Hazira Ltd - India
- IEA Clean Coal Centre - UK
- Malabar Cements Ltd - India
- Savvy Resources Ltd - HongKong
- Miang Besar Coal Terminal - Indonesia
- PNOC Exploration Corporation - Philippines
- Intertek Mineral Services - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Renaissance Capital - South Africa
- Eastern Coal Council - USA
- Orica Mining Services - Indonesia
- PTC India Limited - India
- Banpu Public Company Limited - Thailand
- Meenaskhi Energy Private Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sojitz Corporation - Japan
- Independent Power Producers Association of India
- Parry Sugars Refinery, India
- Xindia Steels Limited - India
- Star Paper Mills Limited - India
- Ministry of Mines - Canada
- Orica Australia Pty. Ltd.
- Formosa Plastics Group - Taiwan
- Aboitiz Power Corporation - Philippines
- Global Business Power Corporation, Philippines
- Minerals Council of Australia
- Coastal Gujarat Power Limited - India
- Australian Coal Association
- Barasentosa Lestari - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Eastern Energy - Thailand
- Sree Jayajothi Cements Limited - India
- OPG Power Generation Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Rio Tinto Coal - Australia
- Tata Chemicals Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Global Green Power PLC Corporation, Philippines
- Meralco Power Generation, Philippines
- SN Aboitiz Power Inc, Philippines
- Thiess Contractors Indonesia
- Toyota Tsusho Corporation, Japan
- Interocean Group of Companies - India
- Mjunction Services Limited - India
- Energy Link Ltd, New Zealand
- Indo Tambangraya Megah - Indonesia
- Alfred C Toepfer International GmbH - Germany
- TeaM Sual Corporation - Philippines
- Bhoruka Overseas - Indonesia
- Pendopo Energi Batubara - Indonesia
- Kartika Selabumi Mining - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ceylon Electricity Board - Sri Lanka
- Rashtriya Ispat Nigam Limited - India
- Sinarmas Energy and Mining - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Oldendorff Carriers - Singapore
- Electricity Authority, New Zealand
- Cigading International Bulk Terminal - Indonesia
- Georgia Ports Authority, United States
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- McConnell Dowell - Australia
- Sarangani Energy Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Bhatia International Limited - India
- Trasteel International SA, Italy
- Indogreen Group - Indonesia
- Maheswari Brothers Coal Limited - India
- South Luzon Thermal Energy Corporation
- Antam Resourcindo - Indonesia
- Grasim Industreis Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Deloitte Consulting - India
- Bhushan Steel Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Manunggal Multi Energi - Indonesia
- Ambuja Cements Ltd - India
- Straits Asia Resources Limited - Singapore
- Wood Mackenzie - Singapore
- AsiaOL BioFuels Corp., Philippines
- SMG Consultants - Indonesia
- Petron Corporation, Philippines
- Altura Mining Limited, Indonesia
- European Bulk Services B.V. - Netherlands
- Mercator Lines Limited - India
- Uttam Galva Steels Limited - India
- Standard Chartered Bank - UAE
- Bangladesh Power Developement Board
- Africa Commodities Group - South Africa
- Coalindo Energy - Indonesia
- Lanco Infratech Ltd - India
- Anglo American - United Kingdom
- Planning Commission, India
- Marubeni Corporation - India
- Gujarat Sidhee Cement - India
- VISA Power Limited - India
- Merrill Lynch Commodities Europe
- Iligan Light & Power Inc, Philippines
- Jindal Steel & Power Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Agrawal Coal Company - India
- CIMB Investment Bank - Malaysia
- White Energy Company Limited
- Mercuria Energy - Indonesia
- New Zealand Coal & Carbon
- Heidelberg Cement - Germany
- Maharashtra Electricity Regulatory Commission - India
- The State Trading Corporation of India Ltd
- GVK Power & Infra Limited - India
- Indian Energy Exchange, India
- Semirara Mining and Power Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- Samtan Co., Ltd - South Korea
- Timah Investasi Mineral - Indoneisa
- Coal and Oil Company - UAE
- Bayan Resources Tbk. - Indonesia
- Energy Development Corp, Philippines
- Electricity Generating Authority of Thailand
- Chamber of Mines of South Africa
- Jorong Barutama Greston.PT - Indonesia
- Thai Mozambique Logistica
- Videocon Industries ltd - India
- Billiton Holdings Pty Ltd - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Edison Trading Spa - Italy
- Riau Bara Harum - Indonesia
- Siam City Cement - Thailand
- Bukit Baiduri Energy - Indonesia
- India Bulls Power Limited - India
- Cement Manufacturers Association - India
- Attock Cement Pakistan Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Vizag Seaport Private Limited - India
- SMC Global Power, Philippines
- Indian Oil Corporation Limited
- Directorate Of Revenue Intelligence - India
- Parliament of New Zealand
- Madhucon Powers Ltd - India
- Kideco Jaya Agung - Indonesia
- Kobexindo Tractors - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Borneo Indobara - Indonesia
- Wilmar Investment Holdings
- Power Finance Corporation Ltd., India
- Chettinad Cement Corporation Ltd - India
- Posco Energy - South Korea
- Dalmia Cement Bharat India
- Kaltim Prima Coal - Indonesia
- Australian Commodity Traders Exchange
- Binh Thuan Hamico - Vietnam
- Salva Resources Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Carbofer General Trading SA - India
- ASAPP Information Group - India
- Krishnapatnam Port Company Ltd. - India
- Larsen & Toubro Limited - India
- Ind-Barath Power Infra Limited - India
- Kapuas Tunggal Persada - Indonesia
- IHS Mccloskey Coal Group - USA
- Siam City Cement PLC, Thailand
- International Coal Ventures Pvt Ltd - India
- Makarim & Taira - Indonesia
- Economic Council, Georgia
- Tamil Nadu electricity Board
- Globalindo Alam Lestari - Indonesia
- Sakthi Sugars Limited - India
- Singapore Mercantile Exchange
- Petrochimia International Co. Ltd.- Taiwan
- Karaikal Port Pvt Ltd - India
- Indonesian Coal Mining Association
- Ministry of Finance - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- GAC Shipping (India) Pvt Ltd
- Neyveli Lignite Corporation Ltd, - India
- Holcim Trading Pte Ltd - Singapore
- The University of Queensland
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