A Global View on Trade Finance
Anand Pande
Global Head of Trade Finance, RBS
While the slowdown in global growth during 2011 and 2012 has had a negative
impact on trade flows, the longer-term prospects for world trade are positive
and are set to lead to strong demand for trade finance products and services.
Innovation will become increasingly important, as investment in technology,
along with standardisation and integration programmes, create new and more
efficient trade finance solutions.
Growth
Global growth is expected to be sluggish
and uneven in 2013, especially in Europe
where the IMF predicts an uptick of
just 0.7%, compared to 3.6% globally
and 7.2% in developing Asia. The most
immediate risk remains the eurozone
crisis, despite a period of relative calm
due to the European Central Bank’s
‘Outright Monetary Transactions’ (OMT)
programme, launched in September
- However, significant challenges
still confront policy-makers, both in terms
of moving towards greater fiscal and
financial risk-sharing, and in breaking
the negative feedback loop between
sovereigns and their banking systems.
This poor economic situation in Europe,
along with some weakening in domestic
demand, contributed to a loss of
growth momentum in emerging market
economies, most notably in China, where
growth slipped below 8% in 2012. Over
the longer term, the developed economies
(US and eurozone) are predicted to have
slower growth, while the global GDP share
of rapid-growth markets is set to increase
from around 34% in 2010 to 48% in 2020.
Trade
Europe’s recession, anaemic US growth
and the slowing Chinese economy put a
dampener on exports worldwide in 2012.
As a result, global trade volume grew by
just 3.2% (IMF estimate), compared to
5.8% in 2011 and 12.6% in 2010. Trade
is projected to expand by 4.5% in 2013,
assuming that a break-up of the euro is
averted and an agreement is reached to
stabilise public finances in the US. Any
trade shift could take a big toll on the US
economy, since exports have accounted for
almost 50% of growth during the recovery
(normally 12%). In fact with domestic
markets flat across most developed
economies, export trade is the major route
to growth for many businesses in the west.Outlook
Despite the short-term weakness, long-term
trends point towards strong growth in, and
driven by, emerging markets. Commodities
and infrastructure development projects are
likely to be key to this.
In fact the growth of world trade in goods
and service is expected to be exponential.
In constant 2010 USD terms, world trade
is forecast to grow from USD 37 trillion in
2010 to USD 122 trillion in 2030, and to
USD 287 trillion in 2050. This corresponds
to average growth per annum of 6.1% up
to 2030, and 5.2% thereafter. Most of this
growth will be driven by emerging markets
(EM) as opposed to advanced economies