NDTO News Article

State of the Global Economy Trade Talk Helps Prepare ND Companies for 2013

Sixty exporters and local business professionals got a candid glimpse into the 2013 economic forecast during the State of the Global Economy Trade Talk, held Jan. 9 in Fargo.  Aryam Vazquez, an international economist with Wells Fargo, led the discussion and answered questions from attendees.  Vazquez said, overall, global economic activity will remain slow in 2013 but trends point toward increased activity in 2014.  Additionally, expansion in the U.S. will continue at a subpar pace while emerging markets (EM’s) will continue to drive global growth, increasing their contribution to world output.

“We’re somewhat optimistic on the state of the global economy in the near-term given better growth trends in the United States, an EU that seems to be stabilizing and better growth trends in the emerging market space,” Vazquez said following his presentation.  “However, on a long-term basis, we remain somewhat apathetic as the capacity of the developed bloc economy to generate significant growth remains limited by their deep structural vulnerabilities.  And despite the steady growth momentum across the EMs, these economies remain ill-capacitated to drive global growth on their own.”

Vazquez divided his presentation into three key variables which dictate the health of the economy:  1. the state of developed markets, 2. emerging markets, and 3. current global challenges.

The contributions to global GDP and output from developed bloc such as the U.S. and EU countries have decreased significantly over the last decade, with share of world output from developed markets (DMs) over 65% in 1992 to less than 50% projected for 2015.  Emerging markets have shown significant growth; projections for 2015 show global output from EMs reaching nearly 55%.   (See Figure 1)

Figure 1:

Vazquez warned that any potential recovery from mature economies is cyclical and not implicit of structural improvement. (See Figure 2)

Figure 2:

Vazquez said China also plays a significant role in the overall global landscape.

“While structural issues across the US and EU economies continue to dominate the overall outlook, there is equal concern over the outlook for China – especially amid its current economic rebalancing and political transition – and the EM in general,” Vazquez said.  “Commodity price trends also seem to be a key focus amid fears the commodity super cycle may be nearing its end.”

International prospects across the industries remain brighter in emerging economies, which are currently more structurally sound.  Vazquez said we will continue to migrate away from a uni-polar economic structure towards a multi-polar order, where global growth remains uneven, complexities continue to escalate and where the risk complex continues to favor the emerging markets over mature economies.

Figure 3:

Vazquez said by remaining cognizant of the economic situation in each market of interest, exporters can successfully navigate the unstable economy.

“Continue to effectively manage the prevailing strengths of those countries you do business in over its evident weaknesses, and target those countries that continue to benefit from well-balanced growth trajectories, strong policy flexibility and lower degrees of vulnerabilities in what remains a highly-delicate global backdrop,” Vazquez said.

For more information on this event, contact the North Dakota Trade Office at (701) 231-1150 or visit www.ndto.com.