A year ago, the outlook for world trade growth was distinctly gloomy with global trade growth having slowed up to around 1.7% for 2016 – below that of world GDP growth. But a year is long time in trade…
This review reflects on how much has changed in the past year and an encouraging year in the Euromoney Trade Finance Survey 2018 Results
New trade order
In addition, uncertainty surrounding Brexit and President Trump’s “America first” approach to global trade gave little to be confident about in 2017. While concern about US protectionism has hardly gone away - January 2017 saw the US ditch the Trans-Pacific Partnership trade deal and the blocking of new judges to set in the WTO seven-member appellate body later in the year – US attitudes to globalisation (or lack of it) are not really affecting overall trade momentum. Where one region pulls back, another takes its place. China’s Belt and Road Initiative (also dubbed One Belt One Road) launched in 2013 connecting 65 countries across three continents brings opportunities in infrastructure, trade, investment, services and supply chain participants.
Figure 1: Global trade rebounds
Fast-forward 12 months and the gloom has metamorphosed to boom – the IMF has confirmed that 2017 “is ending on a high note, with GDP continuing to accelerate over much of the world in the broadest cyclical upswing since the start of the decade). Trade grew faster than GDP for the first time since the collapse started in 2014 thanks to investment with 2017 looking set for a performance at around 4% (see Figure 1). And commodity prices saw an uptick. “Weak capital spending in the energy sector had been an important contributor to the weakness in global investment in 2016,” said the IMF. It added that metals and fuel prices were supported by stronger momentum in global demand as well as supply restraints in the energy sector including hurricane-related stoppages in the US.
The research makes the point that the some of the larger emerging market economies such as Argentina, Brazil and Russia have exited their recessions. However, small emerging market economies dependent on fuel exports, suffering from civil war and natural disasters have struggled.
Trade finance demand
April 2017 saw the publication of the ICC Banking Commission’s ninth report on trade and finance, Rethinking Trade and Finance, based on 255 survey responses from banks located in 98 countries. The report highlighted the that demand outstrips supply for trade finance, with the Asian Development Bank (ADB) research putting the level of unmet demand for trade finance at US$1.5trn, a figure recognised by the United Nations General Assembly.
With Deutsche Bank’s trade finance DNA going back to its Berlin foundation in 1870 to promote and facilitate trade relations between Germany and international markets, we continue to invest in getting trade finance through to those that need it. In some geographies this involves key partnerships with multilateral development banks (ADB being a good example, illustrated by the supply chain finance Landmark Group deal).
We were particularly pleased to win not only the Banker’s Best Trade Finance Award 2017 in their Global Transaction Banking awards but 24 No. 1 positions in the Euromoney Trade Finance Survey 2018. On a regional level Deutsche Bank won the No. 1 position in Western Europe and Asia Pacific and on a country level we won 10 No.1 positions including – for the sixth time running – the No.1 Bet Trade Finance Provider in Germany. In addition, for the first time, the bank has been named No.1 Best Service Provider Financing: Global along with 11 further trade finance service category wins.
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