OCO’s Prediction For 2024 – There May Be Trouble Ahead…
This week we published a new report on trade and investment trends from 2023 and our predictions for 2024. Read on to find out more and download the whole report HERE.
As with 2023, we remain in an uncertain world
At a macro level, there were some notable positives in 2023 with COVID-19 no longer being a health emergency and supply chain returning to normal. But often the good news from 2023 comes with a high level of uncertainty, as shown by current events in the Red Sea.
2023 was a year when many countries got serious about climate change, maybe not in terms of climate targets, but certainly in providing huge incentives for green industries. As our review shows, the US Inflation Reduction Act has transformed investment and forced others to respond. This is creating significant opportunities for companies to extract as much value as possible from well-researched location assessments.
However there remain significant obstacles to growth. Global growth is forecast to slow in 2024, and the situation is exacerbated by geopolitical conflict and increasing protectionism. Analysis of trade data for 2023 has also shown an increase in friend-shoring where countries have increased trade links with similar politically minded partners.
Global investment slowed in 2023
Global investment rebounded in 2021 but since then it has been in decline. Figures for 2023 suggest another year of decline, although our forecasts point to an improvement in 2024, albeit small.
Greenfield FDI had fared better than M&A with growth over the three years up to 2022, but figures for 2023 show declining performance below the ten-year average. One interesting feature of FDI in 2023 has been that despite the decline in the number of projects the value of capital investment and jobs created has continued to go up. Underlying this trend is the green transition with large-scale renewable energy projects and the reconfiguration of whole supply chains to supply electrification.
Globally, some countries are doing better than others
COVID-19 may no longer be a health emergency, but FDI is still feeling the effects. Analysis of trends over the last four years shows that only half of the twenty largest markets for FDI are back to pre-COVID levels of investment. Some of the real ‘winners’ who are well above their pre-COVID levels are high-growth markets such as the UAE, India, Ireland, Spain, and Poland.
These countries have benefited from strong investment from software and IT, business services and financial services, while a growing trade connection between the UAE and India is driving FDI growth between these markets.
High-growth sectors reflect the state of the world
When we conducted a similar analysis for sectors as we did with countries, it identified six high-growth sectors that had recovered strongly since COVID-19.
- No sector bounced back from COVID-19 more significantly than semiconductors. Pent-up demand for the technology that underpins so many megatrends, has been combined with large incentives for investment in the US and companies looking for sanction-free manufacturing bases.
- Space and defence investment has grown significantly over the last ten years and is back above pre-COVID levels as geopolitical tensions continue to grow.
- Renewable energy is another long-term growth market as countries shift to lower emissions solutions to energy.
- Electrical components are in high demand, especially to support EV supply chains and renewables sectors.
- Biotechnology is a consistent if not dramatic growth market, with plenty of scope for further increases thanks to the needs of an aging population, new possibilities for AI in R&D, and new opportunities in areas such as industrial biotech.
- Software and IT had one of the strongest recoveries from the pandemic downturn and will continue to grow thanks to its integral role in so many transformational trends.
What lies in store for 2024?
Our predictions for 2024 suggest a mix of trouble and opportunity, with politics and politicians playing an ever more significant role in how trade and investment operate. Our five predictions are:
- The global economy will increasingly revolve around trading blocs aligned by political views
- An Election Supercycle with voting in countries that represent 60% of global GDP will lead to increased trade tensions
- The incentives battle will intensify
- Generative AI will spread into more business uses
- Supply chains problems will return, and while not as bad as COVID-19, they will force companies to adapt their supply chains.
The key to success in 2024 will be managing the complexity caused by world events and political decisions. For those in investment promotion, understanding trends and how to position your location as a solution will be essential. For companies, it will be a mix of taking advantage of incentives and navigating troubled waters (both literally and figuratively).
OCO Global has over 20 years of experience in strategy development and location assessment. If you have any questions about your international expansion plans, sector and market dynamics, locations or incentives, get in touch to find out more.
To read the full report CLICK HERE.