CM September 2020

(DON’T) ROCK
THE CASBAH
The UK as an emerging market?
GRANTED that this is a little introspective,
but it’s interesting. A report on CNN
Business has suggested that Brexit and
coronavirus is radically altering the UK’s
economy so that it could actually end up
looking more like an emerging economy
than one akin to that seen in France,
Germany or the United States.
A volatile currency, declining global
influence and a reliance on foreign
investors could change our standing in
the world. As that Bank of America noted
when it wrote in a note to clients, ‘we
believe (the pound) is in the process of
evolving into a currency that resembles the
underlying reality of the British economy:
small and shrinking.’ That said, Thomas
The class ceiling might soon shatter
NO one likes using the c-word, but
coronavirus is continuing to cause havoc,
especially so among the most vulnerable
in Africa. According to the World Bank,
around 58m Africans could be pushed
into ‘extreme poverty’. But while the poor
are the most likely to suffer, it appears
that coronavirus is chipping away at the
middle class on the continent – the people
most likely to buy imported goods from
cars and healthcare to consumer products.
It’s this group that is the most
educated, has set up a business and has
boosted consumer demand. As noted in
MoneyWeek, ‘in 30 years, this section of
Playing a long game
TIME performs marvels. It allows rifts to
heal, technologies to develop and societies
to change. Indeed, according to the UN
World Population Prospects 2019, the
planet Earth had a population of ‘just’ 1bn
in 1800, 2bn in 1930, 6bn by 1999 and has
some 7.8bn upon its surface now.
The UN has offered population
forecasts for the future that range wildly
from a high of 15.6bn to a low of 7.3bn
in 2100. The Lancet, a medical journal,
reckons that the figure could stand at
9.7bn by 2064 but may well drop to 8.8bn
by 2100 – a fall caused by the better
education of women and improvements to
contraception.
Now where the story gets interesting
is in where the changes are expected to
happen. It’s predicted that populations
in 23 nations including Japan, Spain
Pugh, UK economist at the research firm
Capital Economics is of the view that
‘we don't think there’s any risk that the
UK is suddenly going to be viewed as
an emerging market, but (Brexit and the
country's response to the pandemic) will
weigh on confidence.’
Could this affect our ability to export?
Unlikely, but it is a consideration. The UK
economy is seeing its worst downturn in
more than 300 years and there’s less than
six months to hammer out a new trade
deal with the European Union, our biggest
export market. The question is…while we
need the rest of the world, will it need us?
We are still the sixth largest economy in the
world, but for how much longer?
society has trebled according to some
estimates, and around 170m of Africa’s
1.3bn population is now defined as middle
class.’
But recession is looming and it’s
possible that around eight million could
be ‘knocked back into poverty’; jobs will
be hit and there is little social security to
protect them or their buying power.
So, if you’re an exporter of consumerled
goods with Africa as a key market,
now would be a good time to consider
where else to develop your reach or at the
minimum, look at which countries have
the furthest to fall.
and Italy will fall by half and another 34
countries – including China – will see
their populations decline by at least 25
percent. In comparison, much of Africa
will see populations at least treble. On top
of that the workforces in China, Spain,
Germany and the UK will drop markedly
and there will be more workers based in
Africa.
Overall the world is going to get much
greyer as the over 80’s outnumber those
under five, two to one. And if you agree
with what the Lancet is predicting, Africa
and the Arab world is the future – Europe
and much of the old order will be relegated
to a ‘has been’.
What does this all mean for exporters?
It’s simple – don’t just look at the here and
now, look to the long-term future and to
changing demographics.
NOTHING triggers market disturbances
like a little local economic meltdown.
And so it is in Algeria where a crackdown
on protesters has seen the authorities
arresting dozens of opposition activists.
Dissent is on the rise.
At issue is what some describe as a
military run system mired in repression,
corruption and economic mismanagement.
The big problem for Algeria, and those
that export to it, is that the economy is
reliant on oil and gas exports – more than
93 percent of its foreign currency reserves
are earned from them. As the world has
seen, coronavirus has lowered demand for
both, and prices have consequently fallen,
a move that has hurt an oil and gas sector
already in decline before coronavirus
struck.
Despite Governmental promises to
diversify the economy, reforms are slow in
coming and GDP is expected to shrink by
5.2 percent and the budget deficit to climb
to 20 percent of GDP. It’s clear – market
trouble is coming to Algeria, so if you want
to ‘rock the casbah’, consider streaming the
Clash without risking your cash.
GROUNDHOG
DAY FOR JAPAN?
JAPAN is heading for more economic
trouble and its worst post-war recession.
According to the Japan Times,
unemployment is at a three year high at 2.6
percent, industrial output is at its lowest
level since the global financial crisis in
2008, and retail sales fell by 12.3 percent
in May (which is hardly surprising since
the VAT rate was hiked again last October
and coronavirus has dented incomes). In
essence, when the Government releases
the data, the NLI Research Institute is
expecting a big contraction in the April-
June figures given the weak domestic and
international demand.
All of this should put exporters on
notice that the Japanese economy is not
the bedrock that it once was.
EXCHANGE RATES VISIT CURRENCYUK.CO.UK
OR CALL 020 7738 0777
Currency UK is authorised and regulated
by the Financial Conduct Authority (FCA).
GBP/EUR
GBP/USD
GBP/CHF
GBP/AUD
GBP/CAD
GBP/JPY
CURRENCY UK
HIGH LOW TREND
1.11483 1.09462 Up
1.31767 1.25158 Up
1.20159 1.17634 Flat
1.83875 1.77025 Up
1.76561 1.69907 Up
134.22069 140.15916 Up
This data was taken on 17th August and refers to the
month previous to/leading up to 16th August 2020.
Advancing the credit profession / www.cicm.com / September 2020 / PAGE 31