Back to the complete issue
Monday, 20 March 2023

The GCC is probably the fastest-growing economic bloc in the world today

Global trade flows and supply chains have just about managed to emerge from the long shadow of the covid-19 crisis. Even now, key commodities are still some months away from heading back to normalcy. For confirmation, just ask carmakers about semiconductor supplies they need for all their fancy models.

But chances of a smooth ride for global trade in 2023 will hinge more on whether a recession will show up, in full force or even partially. Plus, recent floods and nature-linked crises will have their own bearing on commodity movements and, by extension, on their prices.

Globally, we have seen a decline on some of the leading indicators for trade, and demand for goods has slowed somewhat. Despite this, some markets have proven to be more resilient than others — the UAE is one of them.

During my recent visit, it was apparent how agile the government is in enabling businesses to rapidly adapt to the macroeconomic environment. The high oil prices, solid logistic capabilities and the strengths of intra-regional trade flows — especially with Saudi Arabia — coupled with a healthy local demand, have helped support the economy.

I believe global trade is now at a critical inflection point. Global supply chains have been under significant stress in the last two years; businesses have been impacted and these disruptions have resulted in a rethink of the relationship between clients and suppliers, including the need for nearshoring — or even in-country value creation — in an effort to ease the access to finance between clients and suppliers.

The market is accelerating towards more structured trade, especially on supply chain finance. We have seen increased interest from governments, public sector entities, multinationals, and large corporates to leverage their balance-sheets’ strengths to allow financing for the benefit of the economy and within their supply chains.

Supply Chain Finance (SCF) will continue to gain popularity during this period of uncertainty.

Financial institutions can play a pivotal role in facilitating trade, with around 40% of global goods traded being supported by bank-intermediated trade finance.

For HSBC, supporting international trade has been at the heart of our business model since we were founded in 1865. Today, we facilitate approximately USD 740 bn of trade each year. And trade remains key to our future ambitions.

Trade finance has for centuries been paper-based, but blockchain provides a way to boost efficiency, increase transparency, and streamline supply chains. Broader usage of technology to track shipments has taken hold, and blockchain is one among a number of underpinning technologies that are helping global trade evolve.

When blockchain technology is adapted at a large scale, it will have the power to transform the world of trade by improving speed of processes, customer experience and providing a paperless experience.

As the world’s largest trade bank, we have a key role to play in the wider transformation of global trade. We act as a catalyst to allow the most successful and disruptive technologies to energize the market, as well as provide an opportunity to unlock the future of trade.

Technology-driven efficiencies and the expansion to new digital platforms and channels are two of the major drivers of growth, and we have a responsibility to take such solutions to our clients by commercializing them and scaling things at pace.

We are seeing different regional trends. HSBC Global Research’s forecasts are for a slowed pace of global trade growth out to 2024 (3%), given the subdued demand outlook, particularly for goods in the West.

A rebound in China could potentially boost global trade and things could be more positive, but if there is weakness in the second-half of 2023 or early 2024, trade could slow again.

The GCC nonetheless enters 2023 from a position of strength. The region is probably the fastest-growing economic bloc in the world today, there is substantial investment in large scale infrastructure projects, and tourism is booming thanks to some of the best covid-19 management policies seen during the pandemic, all of which support robust local demand.

Looking at the UAE specifically, the domestic economy continued to rebound in 2022, mostly driven by high oil prices and tourism. Expo 2020 in Dubai and the 2022 FIFA World Cup in Qatar have assisted in driving a sharp rebound of visitor numbers to the region.

The budgetary performance has improved significantly this year, which clearly creates a supportive environment for governments in the UAE and across the GCC to deliver on their strategic visions. In MENA, it is estimated that about USD 4.3 tn of projects are planned or are underway across the region, which will help diversify the economy further. The investments across infrastructure, power and energy, transport as well as real estate and social services are continuing with a sense of urgency.

Additionally, in Saudi Arabia, 15 mega-projects are ongoing and acting as a further catalyst to an already dynamic GCC economy.

This op-ed was written by Vivek Ramachandran (LinkedIn), head of Global Trade and Receivables Finance at HSBC. HSBC’s column appears in Enterprise every second Monday. A version of this article first appeared in Gulf News.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.