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Emerging Markets: Braced for volatility

Published January 2016, the Agility Emerging Markets Logistics Index has named China as the foremost emerging market globally, with India showing strong growth potential. Logistics News ME reports the findings

Since the financial crisis of 2008, the world’s trade lines have been re-drawn and with the added impact of unprecedented political developments, the world is becoming increasingly difficult to recognize. But that could all be about to change in 2016, with newly released data suggesting an uptick in the growth of emerging markets is just around the corner.

Agility surveyed 1,200 supply chain logistics executives for its Emerging Markets Logistics Index on their views on the global economic outlook for 2016. Of the sample, 61% of executives are unclear on the direction of the world economy or indicate they expect more turbulence.

However, at the same time, 59.4% feel the IMF was “about right” in forecasting 4.7% growth for emerging markets in 2016.

The Top 10

Five of the top 10 ranked markets moved by at least three positions, while just two – China and Turkey – are in unchanged positions. Comparing the four markets that rose with the four that sank, the difference can largely be attributed to the efforts made to create diversified and modernised economies over the course of the years 2000 – 2010.

The UAE, which rose four positions to rank second overall, is a prime example of this. The Emirates’ ability to understand and play to its strengths has been central to its ability to achieve this ranking.

For many organisations operating in the UAE – including logistics and transportation service providers as well as manufacturers – a network of 34 free trade zones offers full foreign ownership, no direct business taxation, no exchange controls and no limits on the repatriation of capital.

What is therefore an already highly attractive business environment is further complemented with a large pool of migrant labour, including both skilled and low-cost workers. In short, the UAE has taken significant steps to create the conditions for logistics service providers, and their clients, to succeed.

The role of the US

Global economic prospects in 2016 are heavily dependent on the United States, in the view of industry executives. After oil prices and Chinese economic vitality, respondents said the most significant drivers of the global economy will be the strength of the dollar and the health of the US economy.

India

For the first time, supply chain industry professionals see India as the emerging markets country with “the most potential to grow” as a logistics market over the next five years. India edged out China, which was seen as the market with the most potential in past surveys.

India also climbed two spots to third, behind China and the UAE, in the data-driven Agility Emerging Markets Logistics Index. Its rise was propelled by an initial round of economic reforms and a surging economy.

While optimistic, logistics professionals also remain cautious about India. Nearly 42% said India needs more structural reform to sustain its current growth and more than 21% said the country needs more than economic reform if it is to unlock its potential.

 

Agility index

 

In Brief

•    Nearly 1,200 supply chain and logistics executives worldwide shared their views on the 2016 global economic outlook.

•    61% of 1,200 surveyed logistics executives are unclear on the direction of the world economy or indicate they expect more turbulence.

•    The UAE ranks as the world’s No. 2 emerging market after China, even though China’s economy is 25 times larger; India’s is five times larger; and Brazil’s is six times larger.

•    Countries in Latin America are losing ground to other emerging markets as a result of recession and political turmoil in Brazil, the region’s biggest economy, and depressed prices for commodity exports.

•    Industry executives view oil prices and China’s economy as the leading risks to the global economy in 2016.

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