Policy Pulse - 25 November 2019 - George Anjaparidze
A poll of executives attending the TIACA Executive Summit suggests improving conditions for air cargo in 2020. The Veritas Global poll, held in Budapest on 21 November 2019, reveals that 72% of executives expect an improvement in global trade in 2020. While 28% expect a deterioration in the outlook with a downturn in global trade.
Expectations of air cargo executives for global trade in 2020
Source: Veritas Global. Note: each icon represents 10% of executives participating in poll
Sentiment of executives expecting improvement
67% of executives expect a moderate acceleration in trade. With accommodative monetary policy being the key enabler for the improvement in economic conditions. This assertion is in line with data tracked by the Council on Foreign Relations through the Global Monetary Policy Tracker. It tracks monetary policy conditions across 54 economies and shows that current monetary policy easing is near levels observed during the financial crisis.
5% of executives expect a strong upturn in global trade, which could be made possible if the accommodative monetary policy stance is combined with an easing in trade tensions and reduced policy uncertainty. Under this backdrop, there is also an expectation that investors and corporations would start to spend their cash reserves on investments, thereby having a particularly favorable impact on trade.
Sentiment of executives expecting deterioration
28% of executives were expecting a downturn in world trade, due to escalating trade tensions, rising protectionist measures and the possibility of geopolitical disruptions.
Background to poll
Prior to the poll, George Anjaparidze, CEO of Veritas Global, highlighted the rise in volatility and pointed to concerning performance of leading indicators (new export orders and economic policy uncertainty). However, the outlook was not entirely negative as there was room for some cautious optimism for Q4 of 2019. The assertive response of Central Banks to the IMF decision to cut global economic forecasts, could help improve the economic backdrop. Following the October IMF World Economic Outlook report, Central Banks further loosened monetary policy and communicated that they would not tighten any time soon. This should reflect positively on the near-term outlook. Expectations for overall 2019 air cargo traffic performance is to have negative growth in low single digits (3-4%). However, performance should improve in Q4 of 2019 and compared to Q4 of 2018 there is even a reasonable possibility that growth turns positive for the final quarter (October data may continue to show weakness but a pick-up in November and December should not be ruled out).
The forecast for for 2020 was more uncertain. Three possible scenarios for the outlook were presented and executives were invited to vote on the one that best represented their expectation for 2020. Results of the poll are summarized in the chart above.