A new report published today reveals that almost two-thirds of supply chain industry executives surveyed at the end of last year anticipate a worldwide economic contraction in 2020 – with the outbreak of the new coronavirus adding further pressures.
A new report published today reveals that almost two-thirds of supply chain industry executives surveyed at the end of last year anticipate a recession in 2020 – even before the outbreak of the new coronavirus – amid concerns about downward pressure on global trade volumes, uncertain growth prospects, and ongoing friction between the US and China.
Sixty-four percent of industry professionals surveyed for the 2020 Agility Emerging Markets Logistics Index say a recession is likely in the next 12 months, with only 12% of the 780 respondents saying a recession is unlikely. Essa Al-Saleh, CEO of Agility Global Logistics, said he believed the fears of a recession are not to be taken lightly, especially because of uncertainty about the impact of the coronavirus outbreak.
At the same time, most logistics executives said their companies will ride out any turbulence in trade relations between the world’s two largest economies. Seventy-percent of those with operations and investments in China say they will stay put and that their plans are unchanged despite the US-China trade battle.
If they were to move production or sourcing from China, Vietnam and India were respondents’ top choices of places to relocate. They identified rising trade barriers as the factor most likely to hurt emerging markets growth.
The survey is part of the 2020 Agility Emerging Markets Logistics Index, the company’s 11th annual snapshot of industry sentiment and ranking of the world’s 50 leading emerging markets. The Index is a broad gauge of countries’ competitiveness based on their international and domestic logistics strengths and business fundamentals.
Al-Saleh commented: “The fears of a recession are not to be taken lightly, especially because of uncertainty about the impact of the coronavirus outbreak. A positive sign, however, is that a large number of emerging markets economies were able to weather an array of issues — political and social unrest, structural problems, even international sanctions for some — without losing much ground in the past year.”
Commenting further on the impact of the new coronavirus, Al-Saleh added: “There have been disruptions to inbound and outbound air and ocean cargo shipments, trucking and rail cargo services (that) are likely to persist as the coronavirus crisis unfolds. We’re also working with customers to expedite their shipments in the face of port/airport access delays, driver shortages, additional documentation requirements, by-appointment-only customs clearance, and other issues. Ultimately, it’s a fluid situation and we’re continuously monitoring developments.
“There’s a lot of uncertainty about the impact of the coronavirus outbreak, but the outbreak has no bearing on the current Index results – the rankings are based on 2019 data and information. No one can really know what’s going to happen; Agility is monitoring the situation extremely closely.”
The Emerging Markets Logistics Index 2020 ranks 50 countries by factors that make them attractive to logistics providers, freight forwarders, shipping lines, air cargo carriers and distributors. In 2020, the top 10 emerging markets, according to the report are: China, India, United Arab Emirates, Indonesia, Malaysia, Saudi Arabia, Qatar, Mexico, Thailand and Turkey. China, India and Indonesia rank highest for domestic logistics; China, India and Mexico are top for international logistics; and UAE, Malaysia and Saudi Arabia have the best business fundamentals.
Survey highlights include that China and India once again top the 2020 rankings based on their size and strength as international and domestic logistics markets, but lag behind smaller rivals in business fundamentals – a category that ranks countries based on regulatory environment, credit and debt dynamics, contract enforcement, anti-corruption safeguards, price stability and market access. In that area, China ranks No. 8 and India is No. 18.
The strongest clusters of emerging markets are in the Arabian Gulf and Southeast Asia, thanks to business-friendly conditions and core strengths – the Gulf’s energy wealth and Southeast Asian manufacturing power – that draw logistics activity. In the Gulf, UAE (No. 3), Saudi Arabia (6), Qatar (7), Oman (14), Bahrain (15) and Kuwait (19) rank among the most business-friendly emerging markets. Among ASEAN countries, Indonesia (4), Malaysia (5), Thailand (9), and Vietnam (11) are strong.
Survey respondents see India as the market with greatest potential over China, their second choice. In rankings of best business conditions, several countries are making big moves: Egypt climbs 10 spots to #17; Ukraine jumps 10 spots to #27; Ghana drops 13 spots to #32; and Iran tumbles 12 spots to #38.
Forty-two percent of those surveyed say a prolonged trade standoff between the US and China could benefit Southeast Asian countries, which offer manufacturing and sourcing alternatives to China. This is less, however, than 56% who said last year that Southeast Asia would benefit.
Egypt, despite a brief period of social unrest in 2019, showed significant gains across all indices. On the overall index, Egypt rose six spots to No. 20, while leaping 10 spots on the business fundamentals chart (17), six spots on the domestic opportunities index (13) and jumping five spots on the international opportunities index (23).
Logistics customers
Looking at logistics customers, the survey found that the top three factors that keep small businesses out of global trade are trade bureaucracy (17%), government/border instability (14%) and inability to compete with larger rivals (14%), supply chain professionals say in the survey.
Despite the belief a recession is likely, emerging markets still grew an estimated 7% in 2019 and are projected by the IMF to grow 4.4% in 2020. As for what is driving emerging markets’ growth, 23% say modernisation of customs systems and processes, 18% cite increased internet penetration, 16% say modernisation of logistics provider systems (WMS, TMS, etc.), and 15% mention increased adoption and modernisation of online payment systems.
E-commerce fulfilment is the top choice among logistics services expected to maintain or improve growth, well ahead of other services such as domestic last-mile delivery and international express parcel delivery.
According to the report, the countries with the least potential as logistics markets in 2020 are Syria, Iran, Venezuela, Iraq and Libya, according to the survey.
Source: Lloyd’s
