CM September 2020
The CICM magazine for consumer and commercial credit professionals
The CICM magazine for consumer and commercial credit professionals
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(DON’T) ROCK<br />
THE CASBAH<br />
The UK as an emerging market?<br />
GRANTED that this is a little introspective,<br />
but it’s interesting. A report on CNN<br />
Business has suggested that Brexit and<br />
coronavirus is radically altering the UK’s<br />
economy so that it could actually end up<br />
looking more like an emerging economy<br />
than one akin to that seen in France,<br />
Germany or the United States.<br />
A volatile currency, declining global<br />
influence and a reliance on foreign<br />
investors could change our standing in<br />
the world. As that Bank of America noted<br />
when it wrote in a note to clients, ‘we<br />
believe (the pound) is in the process of<br />
evolving into a currency that resembles the<br />
underlying reality of the British economy:<br />
small and shrinking.’ That said, Thomas<br />
The class ceiling might soon shatter<br />
NO one likes using the c-word, but<br />
coronavirus is continuing to cause havoc,<br />
especially so among the most vulnerable<br />
in Africa. According to the World Bank,<br />
around 58m Africans could be pushed<br />
into ‘extreme poverty’. But while the poor<br />
are the most likely to suffer, it appears<br />
that coronavirus is chipping away at the<br />
middle class on the continent – the people<br />
most likely to buy imported goods from<br />
cars and healthcare to consumer products.<br />
It’s this group that is the most<br />
educated, has set up a business and has<br />
boosted consumer demand. As noted in<br />
MoneyWeek, ‘in 30 years, this section of<br />
Playing a long game<br />
TIME performs marvels. It allows rifts to<br />
heal, technologies to develop and societies<br />
to change. Indeed, according to the UN<br />
World Population Prospects 2019, the<br />
planet Earth had a population of ‘just’ 1bn<br />
in 1800, 2bn in 1930, 6bn by 1999 and has<br />
some 7.8bn upon its surface now.<br />
The UN has offered population<br />
forecasts for the future that range wildly<br />
from a high of 15.6bn to a low of 7.3bn<br />
in 2100. The Lancet, a medical journal,<br />
reckons that the figure could stand at<br />
9.7bn by 2064 but may well drop to 8.8bn<br />
by 2100 – a fall caused by the better<br />
education of women and improvements to<br />
contraception.<br />
Now where the story gets interesting<br />
is in where the changes are expected to<br />
happen. It’s predicted that populations<br />
in 23 nations including Japan, Spain<br />
Pugh, UK economist at the research firm<br />
Capital Economics is of the view that<br />
‘we don't think there’s any risk that the<br />
UK is suddenly going to be viewed as<br />
an emerging market, but (Brexit and the<br />
country's response to the pandemic) will<br />
weigh on confidence.’<br />
Could this affect our ability to export?<br />
Unlikely, but it is a consideration. The UK<br />
economy is seeing its worst downturn in<br />
more than 300 years and there’s less than<br />
six months to hammer out a new trade<br />
deal with the European Union, our biggest<br />
export market. The question is…while we<br />
need the rest of the world, will it need us?<br />
We are still the sixth largest economy in the<br />
world, but for how much longer?<br />
society has trebled according to some<br />
estimates, and around 170m of Africa’s<br />
1.3bn population is now defined as middle<br />
class.’<br />
But recession is looming and it’s<br />
possible that around eight million could<br />
be ‘knocked back into poverty’; jobs will<br />
be hit and there is little social security to<br />
protect them or their buying power.<br />
So, if you’re an exporter of consumerled<br />
goods with Africa as a key market,<br />
now would be a good time to consider<br />
where else to develop your reach or at the<br />
minimum, look at which countries have<br />
the furthest to fall.<br />
and Italy will fall by half and another 34<br />
countries – including China – will see<br />
their populations decline by at least 25<br />
percent. In comparison, much of Africa<br />
will see populations at least treble. On top<br />
of that the workforces in China, Spain,<br />
Germany and the UK will drop markedly<br />
and there will be more workers based in<br />
Africa.<br />
Overall the world is going to get much<br />
greyer as the over 80’s outnumber those<br />
under five, two to one. And if you agree<br />
with what the Lancet is predicting, Africa<br />
and the Arab world is the future – Europe<br />
and much of the old order will be relegated<br />
to a ‘has been’.<br />
What does this all mean for exporters?<br />
It’s simple – don’t just look at the here and<br />
now, look to the long-term future and to<br />
changing demographics.<br />
NOTHING triggers market disturbances<br />
like a little local economic meltdown.<br />
And so it is in Algeria where a crackdown<br />
on protesters has seen the authorities<br />
arresting dozens of opposition activists.<br />
Dissent is on the rise.<br />
At issue is what some describe as a<br />
military run system mired in repression,<br />
corruption and economic mismanagement.<br />
The big problem for Algeria, and those<br />
that export to it, is that the economy is<br />
reliant on oil and gas exports – more than<br />
93 percent of its foreign currency reserves<br />
are earned from them. As the world has<br />
seen, coronavirus has lowered demand for<br />
both, and prices have consequently fallen,<br />
a move that has hurt an oil and gas sector<br />
already in decline before coronavirus<br />
struck.<br />
Despite Governmental promises to<br />
diversify the economy, reforms are slow in<br />
coming and GDP is expected to shrink by<br />
5.2 percent and the budget deficit to climb<br />
to 20 percent of GDP. It’s clear – market<br />
trouble is coming to Algeria, so if you want<br />
to ‘rock the casbah’, consider streaming the<br />
Clash without risking your cash.<br />
GROUNDHOG<br />
DAY FOR JAPAN?<br />
JAPAN is heading for more economic<br />
trouble and its worst post-war recession.<br />
According to the Japan Times,<br />
unemployment is at a three year high at 2.6<br />
percent, industrial output is at its lowest<br />
level since the global financial crisis in<br />
2008, and retail sales fell by 12.3 percent<br />
in May (which is hardly surprising since<br />
the VAT rate was hiked again last October<br />
and coronavirus has dented incomes). In<br />
essence, when the Government releases<br />
the data, the NLI Research Institute is<br />
expecting a big contraction in the April-<br />
June figures given the weak domestic and<br />
international demand.<br />
All of this should put exporters on<br />
notice that the Japanese economy is not<br />
the bedrock that it once was.<br />
EXCHANGE RATES VISIT CURRENCYUK.CO.UK<br />
OR CALL 020 7738 0777<br />
Currency UK is authorised and regulated<br />
by the Financial Conduct Authority (FCA).<br />
GBP/EUR<br />
GBP/USD<br />
GBP/CHF<br />
GBP/AUD<br />
GBP/CAD<br />
GBP/JPY<br />
CURRENCY UK<br />
HIGH LOW TREND<br />
1.11483 1.09462 Up<br />
1.31767 1.25158 Up<br />
1.20159 1.17634 Flat<br />
1.83875 1.77025 Up<br />
1.76561 1.69907 Up<br />
134.22069 140.15916 Up<br />
This data was taken on 17th August and refers to the<br />
month previous to/leading up to 16th August <strong>2020</strong>.<br />
Advancing the credit profession / www.cicm.com / <strong>September</strong> <strong>2020</strong> / PAGE 31