As 2013 dawns, there are already several trends emerging that we at Euromonitor International believe will shape the year ahead in Economy, Finance and Trade, suggesting another year of uncertainty. The growing backlash against austerity in the developed world will gain momentum, leaving emerging markets to shoulder the burden of driving global economic growth in 2013. These developing economies will need to depend on home-grown demand to drive real output gains as trade growth remains weak, thanks to increasing protectionism and continued poor demand from the west, before strengthening in the second half of the year.
1. Backfiring austerity measures stifle recovery prospects in developed economies
- Stringent austerity measures are set to continue in many of the economies in Western Europe and become more prevalent in the USA throughout 2013. Despite the growing consensus that austerity policies do more to harm consumer confidence and job creation than good, many governments are choosing to prioritise debt reduction over real GDP growth in 2013. The USA, in particular, is bound to reduce spending as it struggles to contain its public debt levels while the UK is facing the very real possibility of a triple-dip recession;
- Unemployment levels are set to remain high in developed economies, at an average rate of 8.1%, as businesses hold off on investment off the back of poor consumer confidence levels. The eurozone countries at the heart of the sovereign debt crisis (Greece, Spain, Ireland, Portugal) will likely see high unemployment persist through 2013, thanks to the austerity measures imposed by the troika (the European Central Bank, the International Monetary Fund and the European Commission).
2. Emerging markets will drive growth through growing domestic demand and trade with each other
- In 2012, a paradigm shift began which saw emerging market economies realise that they could no longer depend on demand from the developed world to drive growth and we expect this to continue in 2013 when emerging and developing markets will account for 58.9% of global economic growth. China saw its slowest rate of real GDP growth in 12 years in 2012, thanks in large part to falling demand from the west. Its response was to foster domestic growth through lower interest rates to stimulate spending and to invest in other emerging economies. Euromonitor International expects to see even more developing economies follow this model in 2013, as they aggressively attempt to stave off any further contagion from the crisis in the west;
- Some of the biggest drivers of economic growth in 2013 will actually be some of the smaller, developing economies particularly those from Sub-Saharan Africa such as Gambia, Mozambique and the Democratic Republic of Congo, as well as those from Asia Pacific such as Mongolia and Kyrgyzstan. We’re also expecting to see greater trade between these smaller, emerging economies in 2013 as they look towards each other’s burgeoning consumer markets for opportunities.
3. Global trade growth will not return to pre-crisis levels in 2013
- Off the back of the continued lower demand from Western Europe and North America, we are expecting trade growth to remain weak in 2013. As emerging markets look to cultivate domestic sources of growth, trade may suffer. The emerging economies will increasingly look to each other for new trade channels but the likelihood is they won’t be able to make up for the shortfall in demand from the West. However, we do expect trade growth to strengthen in the second half of 2013 as developing economies gather pace;
- Rising protectionism will also hamper trade growth in 2013, thanks to intensifying resource nationalism. 2012 was a particularly poor harvest for food commodities such as wheat, soybeans and maize. The ensuing food crisis and continued adverse weather across Europe is also threatening 2013 harvests, giving rise to fears that food prices will climb sharply. As such, we expect to see more countries impose trade barriers to ensure food commodities stay within their borders.