Global risk management expert Atradius has identified nine promising markets that exporters should consider in 2018.
According to Atradius’ latest economic research emerging market economies are likely to continue strengthening this year, despite monetary policy tightening in advanced markets and a slowdown of China’s economy.
The year’s most promising markets are:
- Costa Rica
- Czech Republic
The recovery in emerging market economies (EMEs) is being driven by stronger global trade, higher commodity prices, still-benign external financing conditions, and supportive domestic policies in some major markets.
Growth in EMEs accelerated from 3.6 per cent to 4.4 per cent in 2017, and is expected to grow further to 4.7 per cent in 2018.
Mark Hoppe, managing director, Australia & New Zealand, Atradius, said: “While the general picture for 2018 is more optimistic, the main downside risks to the 2017 outlook are still present this year. This includes unexpectedly-quick US monetary policy tightening and a faster slowdown of the Chinese economy. Identifying promising markets requires a focus on economies with strong, domestically-driven economic growth with the capacity to deal with external shocks.”
There are three key factors making these markets so promising:
1. Domestically-driven growth: GDP growth fuelled primarily by private consumption and fixed investment as well as sufficient external buffers and a flexible exchange rate reduce the downside risk stemming from global volatility.
2. Supportive policies: stable political and institutional conditions are important and opportunities are increasing in several countries where macroeconomic policymaking is improving, especially in India, Indonesia, and Vietnam.
3. Favourable demographics: young and growing populations with an expanding middle class helps boost consumption and increase demand for investment as well as imports.
Within the 10 most promising markets, there are seven key industries:
1. Agriculture and food: strong growth is expected in Vietnam and Indonesia and demand for imports is expected to remain high.
2. Automotive: the Czech automotive industry is strong and insolvencies are low. Morocco’s export-oriented automotive sector is set for growth while Vietnam is becoming an important import market. The removal of tariffs on vehicle imports from ASEAN member states is expected to drive growth of passenger vehicle sales in 2018.
3. Chemicals and plastics: the Czech chemicals industry is recording increasing demand, while the growing automotive sector is increasing demand for petrochemical products in Indonesia and Vietnam.
4. Infrastructure: India is seeing a heavy push for roads, railways, defence, and power. Cost Rica’s infrastructure sector is buoyed by foreign investment and growth in the tourism sector. In Panama, the government has several large infrastructure projects underway and there are also significant opportunities in Senegal.
5. Machines and engineering: the machinery sector of Indonesia is expected to grow by up to seven per cent this year, and growing investment in infrastructure development in Vietnam is driving higher machinery and equipment imports there.
6. Pharmaceuticals: Latin America is a hot spot for pharmaceuticals growth and the business-friendly environment in Cost Rica attracts multinational investment. Costa Rica also has one of the best healthcare systems in the region and a rapidly-aging population. Colombia and Panama are seeing similar growth.
7. Retail, consumer durables, and electronics: strong economic growth and low unemployment should drive wage growth in Vietnam, while private consumption is expected to grow 6.9 per cent. Senegal and Indonesia are also likely to see growth in demand. There is potential for growth in India as organised retail gains momentum.
“Nothing replaces due diligence when deciding whether to do business with a partner in any country,” said Mr Hoppe.
“However, Australian organisations looking for the next market hotspot should consider researching potential opportunities in Colombia, Cost Rica, the Czech Republic, India, Indonesia, Morocco, Panama, Senegal, and Vietnam.”