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12 Nov 2012

Trading places: India poised to lead export growth

India is the fastest-growing trade partner of 23 countries in the HSBC report

India is the fastest-growing trade partner of 23 countries in the HSBC report

India will have a critical role in the growth of world trade in the years to 2030, as emerging economies continue to lead the way, according to the HSBC Global Connections report. India's growth is linked to the increasing wealth and spending of its emerging middle class, and its developing role as a supplier for Asia.

India is the fastest-growing trade partner of 23 countries covered in the report. China will also be a powerhouse of trade growth and will be joined by emerging trading nations including Vietnam, Indonesia, Egypt, Turkey, Mexico and Poland.

With economic prospects for Europe, excluding Russia, looking downbeat, this implies that many European exporters will need to look beyond their traditional markets for new sources of growth

World trade is forecast to grow at approximately 5 per cent in 2013 and about 6-7 per cent a year in 2014-16. Trade flows will be driven by the emerging markets, led by the Asian region and pushed by China and India. 'South-South' trade and investment flows will become increasingly important in the global context. But trade flows to emerging markets will help the developed world from 2016 onwards, with the UK and US boosting export growth to China.

Growth in merchandise exports from Asia (excluding Japan) is expected to remain robust. Growth will be strongest from India, Vietnam and China, which are all expected to post double-digit annual growth.

Bangladesh is forecast to develop its role linking 'emerging Asia', driven by trade growth with India. Mexico's imports from India are forecast to grow by 27 per cent a year from 2013-15, and by 15 per cent a year from 2016-20 – an example of burgeoning South-South trade. Malaysia is forecast to experience strong export growth to Latin America. Dynamic export performance is expected from Turkey and Egypt.

With economic prospects for Europe, excluding Russia, looking downbeat, this implies that many European exporters will need to look beyond their traditional markets for new sources of growth. Prospects in Eastern Europe appear more upbeat.

Across the Americas, export prospects vary significantly. While the US economy will continue to dominate the region in absolute size, exports are likely to prove more dynamic from Central and South America, with South-South trade driving this expansion.

The developed world is likely to regain traction from 2016 onwards, as it gradually redirects trade flows to developing markets and as the impact of structural reform is felt. UK and US export growth to China will be helped by the consumption habits of China's increasingly wealthy middle class.

The Global Connections report includes the HSBC Trade Forecast, modelled by Oxford Economics for HSBC, based on HSBC's analysis and forecasts of the world economy.

It also includes the HSBC Trade Confidence Index survey, which shows that confidence globally has dropped slightly in the past six months, reflecting the tough conditions during 2012. The use of RMB as a trade settlement currency remained steady at 9 per cent, while the use of euros dropped from 47 per cent six months ago to 43 per cent.

Alan Keir, HSBC Group Managing Director and Global Head of Commercial Banking, said: "Despite a difficult 2012, what remains clear is world trade will continue to underpin business growth in both the near and longer term, with trade growth set to outpace GDP growth to 2030. Emerging economies will drive this, with an increasingly important role for smaller countries beginning to register as potential trading nations. The forecast also highlights opportunities for companies in the UK and US to capitalise on growth in these emerging markets, with forward-thinking businesses diversifying beyond their developed market counterparts to seek new opportunities."

For a copy of the Global Connections Trade Forecast report and for further information, go to www.globalconnections.hsbc.com

Growth in merchandise exports from 2013 to 2015 and from 2016 to 2020

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