CM April 2020

INTERNATIONAL
TRADE
Monthly round-up of the latest stories
in global trade by Andrea Kirkby.
Have we passed ‘peak growth’?
A
comment on project-syndicate.org ransom. There’s the US, which by all accounts
caught my eye recently. Writer Jim is due a recession any day now.
O’Neill reckons that global growth On a positive note, O’Neill thinks that
for the last decade will eventually India is heading to a good place, and with the
stand at around 3.5 percent per year – a right reforms – if prime minister Narendra
number which compares favourably to the Modi can manage it – could easily achieve
3.3 percent of the 1980s and 1990s. However, annual growth of eight- to 10 percent. But
O’Neill thinks that that number should have let’s not forget Africa, which as a region has
been higher considering the growth in the a GDP close to India’s. As O’Neill commented:
size of the global workforce and rising levels “If enough of its major economies can
of productivity.
achieve strong growth, the effects will be
The problem as he sees it is that the 2020s felt more broadly. The rise of Africa seems
might not look as good and global annual both desirable and inevitable. Whether the
growth could be heading for a fall. He points continent can drive global GDP growth will be
to a peak in the growth of the Chinese
a key question in the 2020s.”
workforce while the populations of Japan, So, the question exists – have we passed
Germany, Italy and other leading nations peak growth? Who knows, but one thing is
are both ageing and in decline. The EU is in certain – firms should take the data, and find
a state of turmoil, no matter how it’s billed. those countries with growth potential and get
Brazil and Russia are highly commoditised into bed with local importers before anyone
countries which are held to market price else does.
Deutschland nicht über alles
THE powerhouse that is Germany isn’t in
recession, but it’s not far off. Its economy
stagnated with zero growth in the fourth
quarter of 2019, giving a total growth of 0.6
percent for that year. On a positive note, it is
expected, that the European Commission will
bounce back to 1.1 percent growth in 2020.
It appears that both household and
government spending slowed down in the
fourth quarter, a problem made worse by
Germany’s exposure to the ongoing trade war
between the US and China.
The German economic ministry also sees
risks to the economy from abroad increasing
due to coronavirus. It’s entirely possible that
the virus could push Germany into recession as
Chinese demand falters. So, while the number
of people in employment rose 0.3 percent
across the eurozone in the fourth quarter,
and by 0.2 percent in the European Union, UK
firms doing business in Europe, and especially
Germany, should brace for cutbacks in orders.
It’s entirely possible that the virus could push
Germany into recession as Chinese demand falters
ACCORDING to the Ed Conway in
the Times there’s plenty of hot air
when it comes to working out the
value of a firm. Conway makes the
point that firms used to own assets
involved in production which made
valuing corporates easy. But not
anymore – firms, including airlines,
now lease assets which raises
questions about the very nature
EMPEROR’S NEW CLOTHES
of their businesses.
To drive the point home he details
the recently rescued Flybe which had
a ‘predictably threadbare’ balance
sheet but which owns a ‘handful’ of
Heathrow landing slots ‘worth tens
of millions of pounds a pop’; such as
McDonald’s which makes more money
from property than hamburgers; and
Coca Cola which sells rights to other
firms which make, bottle and sell its
drinks. It appears that although firms
can grow quickly, they can also
collapse at the same rate, especially
those who have few assets and tons of
goodwill. Selling to UK businesses in
this situation is not a great proposition
but add an overseas dimension to the
buyer and exporters could be in for
tricky times.
Advancing the credit profession / www.cicm.com / April 2020 / PAGE 38