Logistics executives optimistic for emerging market cargo growth in 2018

23 / 01 / 2018

Logistics industry executives expect emerging markets to grow this year at their fastest rate since 2013, according to the latest Agility Emerging Markets Index.

The annual index, which is put together by logistics firm Agility and consultant Transport Intelligence (Ti), includes a survey of the expectations of 500 logistics industry executives.

For the year ahead, most executives surveyed backed the International Monetary Fund’s (IMF) GDP growth forecast for emerging markets of 4.8%.

In 2017 the IMF GDP figure stood at 4.6%, while in 2015 and 2016 the figure reached 4.3% after five years of decline.

If the projection for 2018 is correct, it would mark the fastest expansion of emerging markets since 2013 and a second consecutive year of higher growth in developing countries.

Overall, 65.1% said the 4.8% growth rate was ‘about right’, 33% felt it was ‘too optimistic’ and 1.9% felt it was ‘too pessimistic’.

However, the growth rate is still far behind the 7.4% growth rate registered in 2010, Agility and Ti said.

“The logistics industry’s optimism comes as a relief. A year ago, there was great concern that populism in the US and Europe were going to hurt trade and damage emerging markets economies,” said Essa Al-Saleh, chief executive of Agility Global Integrated Logistics.

“In 2018, we are looking at renewed growth overall, although it is likely to be very uneven from region to region and country to country.”

Ti chief executive John Manners-Bell added: “It is refreshing to see a broadly positive result form our research. Better economic growth has driven growth in trade lanes to the emerging markets and there have also been greater levels of investment.

“Broadly speaking, there is a very positive picture, but at the same time there are a few issues which will need to be overcome and those include China’s mounting debt, we are also seeing the re-negotiation of the North American Free Trade Agreement (Nafta), which could effect Mexico and other countries as well.

“Meanwhile, Saudi Arabia is also going through political change and we are not too sure how that is going to work out and also Brazil is still struggling with corruption and its government.

“It won’t be plain sailing, there will be some hiccups along the way, but it is a positive picture.”

According to the report authors, other potential threats to growth include: a possible China-US trade war, commodity price weakness and conflict.

Manners-Bell and Al-Saleh added that growth was driven by inventory re-stocking, while e-commerce had also boosted airfreight demand.

Manners-Bell said: “E-commerce is going to be really important. Because of the large platforms that are building out on a global scale with Alibaba, Amazon and eBay, and a number of others, there will be very strong air cargo growth driven by small- and medium-sized exporters based in many emerging markets.

“There are some issues that need to be overcome in terms of making the trade frictionless and the World Customs Organization is doing a good job in actually smoothing those trade lanes.

“Generally, we will see more agreements taking cross border e-commerce into account and that will drive e-commerce growth in the coming years.”

The index also ranks countries by how attractive they are to logistics providers.

This year, China and India once again occupied first and second spot in the index, increasing the gap between third placed United Arab Emirates (UAE).

The biggest movers in the index were Egypt, up six spots to number 14, and Bangladesh, which was up four spots to 23.

For Egypt this improvement is down to its government making a number of policy changes, including the devaluation of its currency, setting the country up for healthy growth.

Bangladesh’s improvement was down to the apparel and textile industries.

In the opposite direction, Nigeria, Africa’s largest economy, tumbled to number 31 from 24 a year ago.

“In spite of its potential, Nigeria ranks next-to-last in infrastructure and transport connections, or market connectedness,” Agility and Ti said.

It has also been hampered by oil price fluctuations, corruption and violence.

Meanwhile, Venezuela slumped four spots to number 48 as oil production faces difficulties, there is ongoing street violence and hyper inflation.

Other findings from the survey include: Logistics executives are unconcerned, for now, that emerging market economies will be harmed by Brexit, the UK’s departure from the European Union.

Nearly 45% say emerging markets will be unaffected; 25.4% say emerging markets could gain from Brexit through expanded market access.

A year ago, nearly 69% expressed concern that Brexit and the failure of various trade initiatives were a threat to trade.

Industry executives also couldn’t agree on the future of the Nafta, which has come under intense criticism from the Trump administration.

The US, Mexico and Canada are in negotiations aimed at updating the agreement.

Logistics executives were sharply split about whether a new pact would help Mexico (24.3%); hurt Mexico (21.8%); or leave trade unchanged (25.7%).

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