How The Economic Outlook May Affect EMIA Operations In 2020 And Beyond

Ongoing economic uncertainty is having profound effects across the Europe, Middle East, India Africa (EMIA) region. Budgets remain tight, while shareholder demand for increased profits has grown.

So, what is the economic outlook?

Europe
Before the turn of the year, experts agreed that the European economy would experience relatively slow growth throughout 2020. Overall the region was expected to achieve just 1.4% growth after several large industrial players like BASF reported lower than expected profits.

Factors like the Brexit uncertainty and the US-China trade war are also having a negative impact on confidence. More recently, supply issues caused by the Coronavirus (COVID-19) outbreak in China and beyond are also expected to have large repercussions as industry struggles to source raw materials and finished goods to meet customer demand.

Middle East
The Middle East economy continues to be driven by oil; when OPEC agreed to cut production in December 2019, weak global demand forced the reduction in order to shore up crude oil prices.

The effect of reduced production is a corresponding reduction in GDPR growth. The Institute of Chartered Accountants in England and Wales (ICAEW) predicts that GDP growth in the region should increase to 2.1% – assuming Iran and Saudi Arabia perform as expected. Further ahead, the IMF expects this to reach 3.2% in 2021.

Africa
The growth of the African economy continues to gather pace, likely reaching 3.9% in 2020 and 4.1% in 2021. Although healthy, these gains are lower than expected due to the under-performance of the “big five” – Algeria, Egypt, Morocco, Nigeria and South Africa.

According to the African Development Bank, the economic outlook is positive – with one caveat. The quality of human capital available is considered to be well below that of the rest of the world and the ADB warns that this imbalance needs to be addressed quickly. Investment in education and infrastructure will be crucial to driving long-term growth.

India
The Indian economy continues to outperform the global average. According to Morgan Stanley, GDP growth reached 5% during 2019 and is expected to surpass 6.3% this year, worth $3.3 trillion.

These are encouraging figures but remain below the 9%-10% GDP growth required to sustain a workforce that grows by 1 million every month. Lending to fund business growth remains weak as does consumer demand in specific areas like the automotive industry.

Time to change course
The details may differ, but the trend is the same – certain areas within the EMIA region are facing an economic slowdown that could quickly become a serious crash. Forward-thinking businesses are aware of these threats and are already re-engineering their processes to increase efficiency, reduce risk and protect profit margins. In doing so, they will become the last defenses against recession within their respective economies.

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