The most promising markets of 2017: What’s hot, what’s not and how to stomach the risk in between

By Aaron Rutstein, Senior Manager – Buyer Underwriting, for Atradius Risk Services Americas With 2016 properly packed away with the ribbons and glitter of the holidays, it’s time to face 2017, where new world leaders, political volatility and Mother Nature’s influence all promise to play influential roles. While the outlook for Emerging Market Economies (EME) going into 2017 is stable, uncertainty is on the increase with challenges stemming from the strong U.S. dollar and prospects for higher interest rates in advanced markets. First, two of 2016’s largest concerns were the potential for China’s economy to tumble and continued anemic commodity prices. While both look less gloomy in the cold light of January, overall global uncertainty seems to be the new normal. Even still, some markets will enjoy robust, domestically-driven growth in 2017 and are less vulnerable to external volatility, providing potential opportunities for those willing to look for signs of promise within a certain few industries. Market Characteristics to Look For:

1. Domestically driven growth is an essential buffer to insulate from global volatility. The outlook for global GDP and international trade is flat for 2017, coupled with uncertainty about changes the new administration may impose on trade with the United States. Look for emerging markets that can rely on growth from consumption within their own regions.
2. Young and active populations drive demand. Strong emerging markets have growing populations, rising middle classes, and a built-in hunger for imports and investment.
3. Support from the top offers assurance. The most optimistic markets in 2017 have progressive policy drivers leading their governments. Stable political and institutional conditions set the table for business-friendly environments.

Based on these criteria, research from Atradius – the global trade credit, surety and debt collections advisory – shows India, Indonesia, Kenya, Cote d’Ivoire, Peru, Chile and Bulgaria to be particularly well poised to support growth and weather global challenges in the coming year. Going even further, specific industries add the necessary detail to fully paint the picture of opportunity in each of these regions. In particular, they are: Agriculture and food Rising demand and a fragmented food market provide long-term opportunities for foreign food exporters in Bulgaria. Rising consumer confidence and incomes are boosting demand for imported food and beverages in Kenya and Peru. Chemicals and plastics Bulgaria again shows promise, where higher industry and household demand are increasing chemicals demand and yet more than 80% are imported. Likewise, total imports of chemicals for India have grown to USD 19 billion in FY 2015, from USD 10 billion in FY 2013. Construction Demand for infrastructure and investment growth are fueling opportunities for the construction sector, especially in Indonesia, India, Peru, Cote d’Ivoire, and Kenya. In Indonesia, real fixed investment is forecast to increase above 6% in 2017, as the government expedites large projects in order to improve the infrastructure – think toll roads, bridges and airports. Government ambitions in India are also supporting infrastructure growth, which is directly correlated with improvements in the economy. Housing, transportation and IT infrastructure are in high demand. Large public works are also expected under the new administration in Peru. The same accounts for Côte d’Ivoire and Kenya, where major upgrades of infrastructure should provide significant opportunities for building materials and capital goods providers in the coming years. Machines and engineering Those infrastructure investments also boost opportunities for machines and engineering, where in Bulgaria, demand is driven by accelerating European Union investments. The aforementioned construction surge in Indonesia is also driving demand there. Retail, consumer durables and electronics In Côte d’Ivoire, increasing wealth and stable, low inflation is encouraging consumer spending by an emerging middle class, with good growth prospects for retail and fast-moving consumer goods in 2017 and beyond. In Chile and Peru, the retail sector is also forecast to expand while opportunities can also be found in India thanks to a very large, consumption-driven economy. Mother Nature enters the mix and should help with monsoons offering a boost to rural incomes dependent on agriculture, which will increase demand for consumer goods. In closing, volatility in these countries above will be less pronounced due to strong domestic demand, investment-led GDP growth and a demographic tailwind however, risks still remain. Companies in emerging markets have loaded up on dollar denominated debt in recent years and a stronger dollar will act as a headwind to earnings through higher interest payments and brings with it elevated refinancing risk. Emerging markets may be exposed should the Federal Reserve pursue a tighter monetary policy than currently anticipated. As always, knowing your customers is critical but not easily achievable in today’s global business environment. Consider independent monitoring and analysis to fully illuminate your trade decision making. To view the full report, visit: https://atradius.us/reports/the-most-promising-markets-of-2017.html