Business Focus

New problems, new solutions: SACE and SIMEST for the Italian companies in APAC

By SACE Hong Kong Team

According to the latest SACE Rapporto Export, presented on 10th September, Italian exports of goods are expected to contract sharply for this year with -11.3%, to a level of around € 422 billion, just over that recorded in 2016. Despite the severity of the shock, SACE expects a significant rebound in exports of goods already in 2021 (+ 9.3%), showing an almost full recovery. In the following 2022-2023 period, the average growth is then expected to settle at around 5.1%. What above is based on the assumption of a non re-aggravation of the health crisis between the end of 2020 and 2021.

This economic scenario places us in front of unprecedented challenges for the coming years since the consequences of the Covid-19 pandemic have been added in 2020 to the uncertainties of 2019 - GDP and international trade slowdown, protectionist escalation and geopolitical instability - with effects both in the immediate (closure of borders, stop to production activities) and in the long term (reshuffling of value chains, change in consumption habits).

This complex situation requires, on one side, huge efforts from companies in redefining their business models and internationalization strategies, and on the other side imposes on the institutions of the “Sistema Italia” abroad (Embassies, Consulates, ICE offices, Chambers of Commerce, SACE and SIMEST) the task of strengthening their presence and role, maximizing the positive effects of the new tools now available.

The “Decreto Liquidità” has reinforced the SACE’s role as Export Credit Agency, introducing an evolved scheme of co-insurance with the Ministry of Economy and Finance, which will extend the support to Made in Italy in the world. In addition, the same Decree has widened the role of SACE beyond exports, with the task of granting liquidity to all Italian companies damaged by the Covid-19 emergency - with the new “Garanzia Italia” - and supporting new strategic projects to strengthen Italy’s competitiveness.

SIMEST, on its part, until the end of 2020 will grant subsidized loans - managed on behalf of MAECI – with no need of guarantees and, thanks to the new resources made available through the “Patto per l’Export”, with a non-repayable component of up to 50% of the total amount disbursed. Within the new SACE’s instruments, it is worth mentioning the innovative “Push Strategy”, aimed at increasing the presence of Italian SMEs in global value chains through a “general purpose” loan and business matching activities offered to international players operating in sectors with high potential for Made in Italy. In this regard, SACE offices in Hong Kong, the regional hub, Shanghai and Mumbai, are constantly surveying some of the most promising markets in the APAC area, such as China, India, Indonesia, Philippines and Vietnam, with the aim of identifying those foreign targets.

In conclusion, today more than ever, Italian companies that intend to enter or consolidate their position on international markets cannot ignore the tools made available by Italian and supranational institutions. The “Patto per l’Export” recently presented by MAECI, the new FTAs signed at EU level (one of the latest with Vietnam), the ICE products, the support of the Chambers of Commerce, the insurance-financial solutions of SACE and the instruments of SIMEST are available to all Italian companies: knowing and making good use of them can be critical to ensure their success on foreign markets.

“SACE and SIMEST support the Italian companies in their activity abroad both for commercial transactions and investment initiatives with a range of trade finance, political and credit risk insurance, financial guarantees, sureties, soft loans as well as equity participation instruments. With over € 133 billion of overall outstanding commitments, SACE and SIMEST serve more than 25,000 business customers, facilitating access to commercial & bank financing in 198 countries worldwide. SACE is present in Asia with three offices, in Hong Kong, hub for the APAC Region, Shanghai and Mumbai.”

sacesimest.it | hongkong@sace.it

Global Market Outlook and Economic Forecasts Q3 2020

By

Aiste Navaityte, Senior Data Analyst, Economies and Consumers Daniel Solomon, PhD, Senior Economist, Economies and Consumers Giedrius Stalenis, Consultant, Economies Finance and Trade Marija Aciene, Senior Data Analyst, Economies and Consumers

According to Euromonitor International’s Global Economy Forecast Report Q3 2020, in Q3 2020, global economic activity levels remain significantly below normal, despite the relaxation of the strictest Coronavirus (covid-19) pandemic social distancing measures.

Under the baseline / most likely scenario, the global economy is headed for the worst global recession since the great depression of the 1930s, with global output set to contract by 3–6% in 2020.

The global GDP growth forecast has been downgraded by 1.5 percentage points compared to the forecast in May, with a 1.2 percentage point downgrade for advanced economies, a 1.7 percentage point downgrade for developing economies. This mainly reflects the worse than expected economic effects of the pandemic in Western Europe, India and Latin America.

A sneak peek on the general outlook of some of the countries and regions:

The US

The US GDP will increase by 2.2 to 5.8% in 2021, however it is only expected to recover to its 2019 level in 2022. The economy would remain 4% below the level it would have reached in 2022 under our pre COVID-19 forecasts.

China

China’s real consumer spending per capita declined by 9.3% year-on-year in the first half of 2020 however its economy has rebounded better than expected based on official statistics. Euromonitor has revised its 2020 growth forecast upwards by 0.6 percentage points since May to the range of -0.3% and 2.7%.:

India

In Q2 2020, India’s annual price growth was around 5.2% year-on-year, while in Q3 it expected to reach approximately 2.6%, which is just within the Reserve Bank of India’s 2 to 6% target.

Japan

Japan’s economy shrank by 7.8% in Q2 2020, 0.7 percentage points lower than the first quarter of the 2009 Global Financial Crisis. The country’s economic recovery will begin in 2021 with a growth rate of 1.2 to 4%.

UK

The UK’s real GDP forecast has been lowered by 4.3 percentage points in Q3 2020 due to a rapidly declining labour market and a 50% probability of a No-Deal Brexit.

Eurozone

The Eurozone economy experienced recovery in retail during the months of May and June this year, however with the risk of a more severe second wave, extensive restrictions and partial lockdowns are significant as of the end of Q3 2020 and will considerably weigh on the economy.

Russia

The Russian economy contracted by 8.5% year-on-year in Q2 2020. Although the infection curve is flattening in the country with business and consumer confidence slowly recovering. The economy would take until 2023 to reach 2019 level of output.

Brazil

Brazil’s economic activity forecasts continue to worsen due to prolonged uncertainty in both domestic and global outlooks. Its GDP is forecast to decline by 9% in 2020 with a growth of 3.3% in 2021.

The pandemic has worsened in developing economies, leading to greater than expected hits to economic activity in countries with big informal sectors and less scope for social distancing.

The August forecast also assumes more persistent social distancing effects in H2 2020, and more adverse effects on productivity of businesses’ adaptations to reduce COVID-19 infection risks (e.g. more resources devoted to hygiene and social distancing measures). Download the full report here: https://bit.ly/2FBwU8V

Source: Euromonitor International Macro Model

Euromonitor International is a global market research company providing strategic intelligence on industries, companies, economies and consumers around the world. Comprehensive international coverage and insights across consumer goods, business-to-business and service industries make our research an essential resource for businesses of all sizes. Bridging methodologies based on data science and on-the-ground research, we distill strategic and tactical data through flexible solutions, giving real-world context for business decisions. Euromonitor International’s Hong Kong subsidiary is the company’s 14th office worldwide, which manages business in Hong Kong, Macao and Taiwan and leverages on-the-ground analysis with actionable data and insights in the region.