Dun & Bradstreet takes a look at global economic prospects

So what on earth is happening in the global economy? We entered 2014 with most commentators being pretty positive, the UK and USA in particular seemingly moving ahead well.  Then suddenly, or so it seems, we have seen stock markets lose 5% of their value I January alone, currency crises in countries such as Turkey, and fears of greater problems ahead in emerging markets.

To the interested non-expert, which is how I would define myself, and is probably the position for most procurement practitioners, it can all appear somewhat baffling. And yet it is important to understand what is going on, because of course these macro-economic developments can have a major effect on market prices, currency rates, future production and business plans, employment prospects...

It is timely therefore to see a new report from Dun & Bradstreet.  D&B’s Global Economic Outlook to 2018: 2013 Year-End Update  is an interesting and helpful look at what is going on in the world economy.

The four key summary comments are:

  • The recovery from the 2008-09 recession remains the most challenging in the past century.
  • However, we are more optimistic about growth in 2014 and beyond, particularly in the U.S.
  • Headwinds remain in the form of potential policy errors related to quantitative easing tapering, the healing process in advanced economies, and imbalances in the emerging markets.
  • Austerity programs are also increasing political and social unrest.

It must have been written before January’s developments, so the warnings it contains appear rather prescient. But it is far from a picture of gloom and despondency – “ In the six months since our mid-year 2013 report, we have become more optimistic about the recovery from the 2008- 09 recession”.

But it does highlight risks, mainly arising from the slowing down in quantitative easing (or ‘governments printing money’, as I like to simplistically think of it) and the consequent effects in emerging markets.

“There is little margin for error  in the pace and timing of the Federal Reserve’s decision to end its quantitative easing program (similar programs will eventually end in the EU, Japan, and U.K.). In addition, economic policy-makers in developed countries are still walking a tightrope in attempting to reduce high levels of public debt while supporting growth in their economies”.

D&B assessed 25 of the leading emerging markets (Angola, Argentina, Brazil, Chile, China, Colombia, Egypt, Hungary, India, Indonesia, Iran, Malaysia, Mexico, Nigeria, Philippines, Poland, Romania, Russia, Saudi Arabia, South Africa, Thailand, Turkey, Ukraine, Venezuela, and Vietnam) to consider  the “risks and opportunities of cross-border trade and investment with counterparties in these countries”.

They have scored  the short-term vulnerability of these 25 major emerging economies against each other, and also looked at the longer term situation using four ‘supply side’ factors, such as infrastructure, competitiveness and openness of the economy. Finally, their third analysis looks at the political outlook and stability of the countries.

The results are fascinating, with quite different rankings for countries on those three measures. Take a look for yourself here - and a few days ago I spoke to Warwick Knowles, D & B’s UK Chief Economist. It was useful getting his insight into some of these complex issues, and we’ll feature his comments in part 2 tomorrow.

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