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HSBC predicts dual speed rebound for global trade

India and China will be joined by emerging trading nations like Vietnam, Indonesia, Egypt, Turkey, Mexico and Poland to record significant trade growth in the next three years, according to HSBC Group’s latest global trade forecast.

India emerges as the fastest growing trade market

As these economies industrialise, trade in higher value goods will increase, reflecting the greater maturity of these faster-growing economies with large populations and rapidly expanding middle-class consumer markets.

“Despite a difficult 2012, what remains clear is world trade will continue to underpin business growth in both the near and longer term, with trade growth set to outpace GDP growth to 2030,” HSBC Group managing director and global head of commercial banking Alan Keir explained.

“Emerging economies will drive this, with an increasingly important role for smaller countries beginning to register as potential trading nations; ambitious countries brimming with entrepreneurial and confident businesses seeking opportunities to grow. But the forecast also highlights opportunities for companies in the UK and US to capitalise on growth in these emerging markets, with forward-thinking businesses diversifying beyond their developed market counterparts to seek new opportunities.”

The developed world begins to regain traction from 2016 onwards, as it gradually redirects trade flows to emerging markets and as the impact of structural reform is felt. Over that period, the report predicts that the UK and the US will boost export growth to China, as the consumption habits of China’s increasingly wealthy middle classes move up the value curve.

The HSBC trade forecast highlights India’s critical role in world trade growth over the entire period. India represents the fastest growing import or export partner (or both) between 2013-15 or 2016-2020 for the 23 markets. India’s trade growth can be linked to its growing consumer wealth and emerging middle class, investment in infrastructure development, the impact of foreign direct investment, its diverse range of exports and a move to produce goods higher up the value chain, and its developing role as a supply chain hub for Asia.

Echoing the HSBC trade forecast, the latest HSBC trade confidence index of exporters reveals greater short term confidence among emerging nations, led by India. Businesses in these markets are exploring new trade corridors, finding new trade partners and new trade networks from which to grow. Businesses in developed countries are – unsurprisingly – less confident about trade prospects.

The TCI also shows that four in five businesses globally (84 per cent) expect trade volumes to remain steady or to grow over the next six months. It is to emerging economies that exporters are turning; China remains the trade partner of choice for a quarter (22 per cent) of survey respondents, followed by Latin America and Southeast Asia – positive news for short term global trade growth.

In addition, the HSBC trade forecast highlights that Bangladesh is expected to develop its role linking ‘emerging Asia’ driven by trade growth with India throughout the period (19 per cent 2013-15, 14 per cent 2016-20). Further afield, building on its European strengths, Poland will become Bangladesh’s eighth largest export partner by 2030, from 11th place in 2011.

Mexico’s bilateral trade relationship with India is an example of the growing role of emerging markets in the global supply chain and of burgeoning south-south trade. Imports from India are expected to grow by 27 per cent annualised 2013-15, and at 15 per cent a year between 2016-20.

Malaysia is forecast to see strong export growth to Latin America in the years to 2020, at approximately nine per cent in the period 2016-20, underpinned by a greater sophistication in the products imported by the continent, particularly in electronic goods. Exports to Brazil are predicted to grow 14 per cent annualised over the same period.

Turkey and Egypt are expected to demonstrate dynamic export performance to 2020. Benefitting from a rapidly expanding export base, lower energy costs (short-term) and an important ‘trade hub’ position, both will see export trade growth of over 12 per cent 2013-15. Turkey’s trade growth will continue 2016-20 as prospects improve in Europe, and remain at a steady nine per cent a year between 2021-30.

Vietnam is expected to record double digit annualised trade growth throughout the forecast period 2012-30.

“This trade forecast highlights the increasing importance of international trade for our customers,” HSBC Bank Malta head of commercial banking Michel Cordina said.

“Understanding what the future of world trade may look like and helping our customers capitalise on that opportunity is critical. Our trade forecast is a key component in helping us do that.”

The Global Connections Trade Forecast is available at www.globalconnections.hsbc.com.

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