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World Trade Impacts On Contracting

February 10, 2010

Global trade fell by 14.4% in 2009, based on World Bank statistics. According to the International Monetary Fund, export volumes showed some recovery over 2008, but most of this was in the third quarter (up 3.5%) and appears to have been driven largely by re-stocking.

Economies are growing at different rates and in different ways. That means trading patterns are changing – and that the contracts and commercial professional must adjust to a world that requires far more agility. We must be ready to grasp new market opportunities, to enter new territories, to manage change and deal with new sources of risk.

IACCM‘s October 2009 quarterly survey on The State of Global Markets reflected the growth in Q3, when a majority reported stabilization and increased optimism for trading conditions in Q4.  The January 2010 report indicated that there was growth for most – but not all – and also revealed variations by world region and industry. It showed a decline in the level of price-focused renegotiation of contracts, but also revealed that cost cutting remains Procurement’s number one priority.

Looking forward, the IMF is predicting that the world economy will grow 3.9% this year . although for ‘rich’ countries this will be only 2.1%. All reports reflect this buoyancy in developing markets, especially in Asia -Pacific, but spreading into Eastern Europe and South Africa. China and India are of course today’s big drivers of growth.

This shift of trading strength and growth has several implications for the world of contracting and procurement. For example, it is likely to favor consumer good producers; it is likely to sustain commodity prices; and it is likely that the dollar will remain strong against the Euro.

Copies of the latest IACCM Global Trade Survey can be obtained from info@iaccm.com

One Comment
  1. Gregg permalink

    Hi Tim

    Sitting in South Africa, I can say that I am not as optimistic as the IMF particularly in reference to their use of the word “buoyancy”. If by that they mean keeping our heads above water than yes, robust growth I don’t think so. Stabilisation and sluggish growth at best would be prudent planning. Time will tell. Let’s revisit at year end.

    Private sector here is also delevering (not as much as in other regions though) and the public sector is already levered and will also need to delever over the coming years. The recessionary output gap looks like it could take a while to close.

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