Policy Pulse - George Anjaparidze - 10 February 2020
We got 3 out of 4 predictions right for air cargo performance in 2019 (see table). While not perfect, it is far better than established industry forecasters.
Table: Air cargo 2019 forecast vs. actual
Source: Forecast performance is based on Veritas Global forecast, actual performance is based on IATA reporting of year end data and IHS Markit high frequency indicators.
For 2020, we expect air cargo traffic performance to grow by about 3% to 4%
On the macroeconomic front we expect to see positive lagged effects in 2020 from monetary policy easing we saw in 2019. High frequency indicators show the global economy continued to accelerate in January 2020 for the third straight month. However, trade performance has struggled to recover. Overall trade tensions are easing but trade relationships have not normalized and are unlikely to in the foreseeable future. Decisions by some central banks to pursue less loose monetary policy in early 2020, if further tightened, add downside risks to our forecast.
One-off factors and policy risks also influence our outlook. The coronavirus outbreaks have disrupted supply chains and on-net we expect this to have a favorable impact on air cargo demand. However, the sector faces unprecedented level of policy risks.
Policy issues in 2020 will have a major impact on air cargo demand this year as well as the more distant future. In addition to trade tensions, negotiations at the WTO will specifically impact air cargo performance, including negotiations on whether to extend the customs duties moratorium on international e-commerce, compliance with tariff policies of the Information Technology Agreement and implementation of the Trade Facilitation Agreement. Negative outcomes of these negotiations add downside risks to our forecast.
Furthermore, growing consumer awareness on climate change will chip away at demand, especially if industry is unable to improve perceptions and sustainability credentials of the air cargo product.
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