Elie Maroun Al Asmar, Head of Commercial Banking in Qatar.
DOHA: Businesses are upbeat about their prospects, encouraged by customer demand and favourable economic conditions, but are revising their strategies as protectionism dents the outlook for international trade, according to a new HSBC survey of over 8,500 companies: ‘Navigator: Now, next and how for business’.
More than three quarters (78 percent) of companies are positive about the trading environment, rising to 86 percent in ASEAN countries and 82 percent in the EU, according to the 34-market report.
Over a third (35 percent) expect increasing consumption to be the top driver of their growth in the next year, with almost as many (33 percent) focusing on the economic environment and 32 percent on technology to increase efficiencies or develop new products and services.
Yet at the same time, political headwinds are gaining strength as 63 percent of firms think governments are becoming more protective of their home economies, up 2 percentage points since the first quarter of 2018. For those companies with a negative outlook on their company’s prospects, tariffs and the US-China trade dispute are the main reasons for pessimism (31 percent each).
The cost of tariffs is the top concern for US firms with a negative outlook (60 percent), while in mainland China and Hong Kong the political dispute with the US is the greatest concern (65 percent and 53 percent respectively). In Russia (46 percent), Germany (39 percent) and Turkey (36 percent), it is the wider context of geo-political tensions that alarms them most.
Reflecting these uncertainties, many companies are turning their attention to intra-regional rather than inter-regional trading opportunities. When asked about their top targets for future trade growth, the number of European companies citing Asian markets dropped from 30 percent in the first quarter to 18 percent now, North American firms citing Asia fell from 43 percent to 30 percent, and Asian companies citing North America slipped from 44 percent to 34 percent.
At the same time, more North American companies plan to trade within their home region in the next three to five years (+5pp to 38 percent), and more Asia-Pacific companies are looking at China specifically as a future growth market (+4pp to 16 percent).
Noel Quinn, Chief Executive of Global Commercial Banking at HSBC, said: “Businesses are staying positive, but they’re signalling to policymakers that protectionism is a significant concern that’s reducing their appetite to grow through international trade. Some are looking closer to home for opportunities, and many are adapting their approach to stay fit for the future.
We expect technology, digitisation and data to play an increasingly important strategic role by enabling businesses to develop their products and services, reach new customers and cut costs by improving operational efficiency.”
The Navigator survey also shows that more than half of companies (51 percent) expect that free trade agreements, where they apply to their country and industry, will benefit them over the next three years. FTAs are particularly popular in emerging markets, with 60 percent of firms saying they will have a positive impact, compared to 45 percent of firms in developed markets.
