Geopolitical Shocks and Climate Change Will Remain Biggest Risks in 2025, Says EIU Report

"Hopes that the world will one day return to normal have been continually dashed since the covid-19 pandemic, and 2025 will be no different," the Economist Intelligence Unit (EIU) says in its Industry outlook 2025 report that explores the challenges, opportunities and trends to watch in the following six industries: energy, financial services, consumer goods and retailing, technology, automotive, and healthcare. The report further says: "Although working and travel patterns are normalizing, the economic and political outlook remains uncertain. EIU forecasts that real GDP will grow by a subdued 2.6% in 2025, similar to 2024 but slower than the average for the ten years before the pandemic." What is more, "The US economy will slow as labor markets tighten, but China's will accelerate slightly, amid stimulus and reviving trade. Those of the EU and Japan will also tick up, but only smaller developing markets such as India will deliver significant growth."

Geopolitical tensions and trade barriers will force more shifts in supply chains, amid subdued business growth. The EIU also presents the following predictions for 2025:

• Inflation is expected to ease, allowing for further monetary easing.
• Prices for agricultural and energy commodities will fall, but those for industrial raw materials will rise.
• Geopolitical risks will persist amid wars in Ukraine and the Middle East, while rising trade barriers between the EU, the US and China will reshape supply chains.
• Climate change will increase geopolitical tensions. National climate pledges will be updated at COP30 in November 2025, but much will depend on US leadership.
• Investment in technology, especially artificial intelligence (AI), will remain strong, but tech companies will face regulatory pressures, investor impatience and scrutiny over energy usage.

According to the EIU, "Falling inflation will allow monetary easing to continue. We expect the Federal Reserve (Fed, the US central bank) to cut interest rates by a further 50 basis points during 2025. We also expect prices for agricultural commodities and industrial raw materials to move in different directions in 2025- 26. Although agricultural prices will continue to trend downwards, prices for industrial raw materials will rise again, particularly for base metals that benefit from the green transition. As for energy commodities, prices will fall on average, but remain at risk from political shocks."

The UK-based company provides the following key global forecasts for each sector covered by its report:

• Energy: Fossil-fuel markets will continue to face geopolitical risks amid conflicts in the Middle East and Ukraine, but investment into renewables will remain strong, particularly in China.
• Financial services: Falling interest rates will weigh on bank profit margins, leading to lower dividend payouts, but the Basel III endgame will be eased or delayed further.
• Consumer goods and retailing: Global retail volumes will expand by 2.2%, helped by disinflation, but regulations around online retailing will tighten further, particularly for high-volume low-price Asian retailers such as Shein and Temu.
• Technology: More countries will start using satellite internet, but use cases will be limited to enterprise clients—military and maritime. Amazon's Kuiper will disrupt the market duopoly of Starlink and EutelSat OneWeb.
• Automotive: After a difficult few years, annual new-vehicle sales will reach a record 97.2m units in 2025. We forecast that sales of new cars will rise by 2%, commercial vehicles by 4% and electric vehicles by 16%.
• Healthcare: Global healthcare spending will outpace inflation, growing by 1.9% in real terms. The World Health Organization will make climate change the focus of its 14th four-year general program, which starts in 2025.

Companies and investors alike should take note that geopolitical shocks and climate change will remain the biggest risks in 2025. The EIU's "baseline forecast assumes that another large-scale war will not break out in Asia or the Middle East. However, the continued threat of geopolitical conflict, in addition to the continuing war in Ukraine, will lead to economic reconfiguration and policy divergence." Moreover, "The EU and the US are already raising barriers against Chinese exports in areas from  automotive and technology to healthcare. Chinese retaliation is likely to intensify in 2025 as rival blocs emerge across the world. These trends," according to the report's authors, "will reshape supply chains over 2025, and could upend our forecast of falling commodity prices and inflation."

Regarding climate change and how efforts to mitigate it will play in these political rifts, the report notes that "At COP30 in November 2025 governments are due to update their national climate pledges (NDCs), but much will depend on US leadership. The debate over environmental, social and governance (ESG) reporting will intensify as regulations enforcing disclosure come into effect in the EU and elsewhere." In addition, "EU climate regulations, due to come into force from 2026, will also have an international impact on trade by forcing multinational companies to monitor their supply chains."

While investment in technology, particularly AI, will be strong as projects gather pace, "technology companies will face pressure from several directions as regulations tighten (particularly in Europe), investors become more impatient for profits and their energy usage comes under more scrutiny." I agree with the EIU that "Companies will need to navigate these new requirements, while also trying to reconfigure their supply chains and seek out areas of growth."

What challenges, opportunities and trends are you watching as we celebrate the beginning of 2025?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Silicon Valley at the Top of the Global Startup Ecosystem in 2023

The 2024 Global Startup Ecosystem Report (GSER) by Startup Genome and the Global Entrepreneurship Network was released at London Tech Week, in collaboration with the Founders Forum, Informa Tech and London & Partners. Presented by Stephan Kuester, Managing Partner at Startup Genome, the GSER analyzes data from over 4.5 million companies across 300+ entrepreneurial innovation ecosystems and features rankings that indicate which ecosystems are currently driving innovation and deep knowledge about startup trends around the world.

Global key findings from the the 2024 GSER include:

• Top three global ecosystems: Silicon Valley remains at the top, followed by New York City and London tied for #2.
• The number of new unicorns in 2023 was down 58% from 2022 and 87% from the 2021 peak. With 15 unicorns, Silicon Valley again led all ecosystems for the most new unicorns in 2023, though this was down 80% from 2022. The Tashkent, Lyon, and Rhineland startup ecosystems welcomed their first unicorns in 2023.
• Series A funding amount in 2023 was down 46% from 2022, and the value of large exits ($50M+) fell 47% over the same period.
• In 2023, the Series A funding amount share for Top 40 ranked GSER 2024 ecosystems was 65%, down from 79% for these ecosystems in 2019. The share of Series A funding amount for the Top 100 Emerging Ecosystems reached 19% in 2023 vs. 13% in 2019.
• Q1 2024 has projected higher Series A funding amount and deal count than Q4 2023.
• Generative AI saw a surge in funding, with nearly 20% of all VC funding in 2023 going to GenAI-focused startups. GenAI VC funding increased 3x in 2023 compared to 2022. Deal counts nearly doubled.
• In 2023, more than half of new unicorns were in the GenAI and Deep Tech sub-sectors, a higher rate than in 2021.
• Late-stage Cleantech startups raised 2.5x more funding in H2 2023 than in H1 2020. Europe has outperformed the U.S. and China in terms of Cleantech Series A funding growth from 2021 to 2023.
• Seoul moved up three spots, now ranked #9, entering the Top 10 ecosystems this year.
• Tokyo has entered the global Top 10 for the first time, marking the most significant improvement among the Top 10 ecosystems.
• The top two Chinese ecosystems Beijing and Shanghai, have dropped in the overall rankings to #8 and #11. Shenzhen has shown impressive growth, moving up seven spots to rank #28.
• Europe is the most represented region in the Emerging Ecosystems Ranking, with a 42% share in the Top 100 Emerging Ecosystems, followed by North America with 27%.
• Madrid moved up 12 ranks, claiming to #1 in the Emerging Ecosystems Ranking.
• Barcelona moved up two positions in the Emerging Ecosystems Ranking, reaching #2.
• Athens has entered the Top 100 Emerging Ecosystems Ranking, reaching the 51-60 range in 2024.
  
• Greater Lausanne Region moved up 16 positions, reaching #11 in the Emerging Ecosystems Ranking.
• Jakarta (#6) and Metro Rhein-Ruhr (#9) both entered the Top 10 Emerging Ecosystems Ranking.
• Melbourne is ranking as the #32 Global Startup Ecosystem, moving up one spot from GSER 2023.
• Mexico City has shown impressive growth, reaching the 21-30 range in the Emerging Ecosystems Ranking from the 41-50 range in 2023.
• The top five ranking sub-Saharan African Ecosystems are Nairobi, Lagos, Cape Town, Johannesburg, Accra.
• Tel Aviv is the only MENA ecosystem ranking in the Top 40, globally moving up one place to #4 (tied with Los Angeles).

Now in its 12th year, the GSER provides insights into the world's leading startup ecosystems, emerging trends, and key challenges facing entrepreneurs. As explained in Startup Genome's press release, "The 2024 edition ranks the top 40 global ecosystems, a ranking of emerging ecosystems, and expanded regional rankings. The report, driven by a consortium of representatives from 40+ countries, looks at the current state of startup activity and related investment. It also highlights startup communities from a regional perspective, separately ranking ecosystems in Asia, Europe, Latin America, MENA, North America, Oceania, and sub-Saharan Africa. Contributions from thought leaders further enrich the report's extensive, evidence-based findings, which are the product of over a decade of Startup Genome's independent research and policy work."

I appreciate how the GSER is designed to provide valuable perspective on the global startup landscape and actionable recommendations for entrepreneurs, investors, policymakers, and other stakeholders looking to drive innovation and economic growth even in these challenging times.

What are your thoughts about GSER's key findings?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Growth Is Proving Surprisingly Resilient in the Face of High Interest Rates and Geopolitical Risks, Says EIU Report

In its latest global economic outlook report, the Economist Intelligence Unit (EIU) "forecasts more fragmentation and regionalization in the world economy in 2024-28 as alliances tighten and competing blocs form." What is more, "The return of industrial policy, including sanctions and the provision of new incentives, will push firms to adopt more inefficient supply chains, stoke trade tensions in strategic sectors and make it difficult to compete across the global marketplace. These developments will drag on growth potential." The EIU expects "global real GDP will expand by 2.8% a year on average over the next five years—below the 3% of the 2010s, which was hardly a stellar decade for the global economy."

The UK-based organization adds that "In the near term, however, the global economy is showing resilience in the face of international conflict and higher interest rates. This mainly reflects the remarkable strength of the US economy, which is driven by strong household finances, a rising trend in manufacturing investment and a booming technology sector. Elsewhere, the picture is less dynamic but short of a downturn." Moreover, "Momentum in Europe will build gradually in 2024. Modest government stimulus in China is helping the economy to in the Middle East as the conflict in Gaza continues. Russia's invasion of Ukraine, now in its third year, shows no sign of resolution. Flash points in Asia, such as in relation to the South China Sea and Taiwan, will pose a persistent threat to the fragile stability that has developed in US-China relations. The diffusion of global power and uncertainty over the direction of US foreign policy underpins this rise in geopolitical risk."

Other key findings from the report include:

• 2.5% global real GDP growth in 2024 (compared with 2.4% previously), meaning growth will be unchanged rather than slowing from 2023. Growth is proving surprisingly resilient in the face of high interest rates and geopolitical risks.
• The change in global growth reflects another upward revision for US growth in 2024 to 2.2% (from 2% previously), upward revisions for several European economies that have pushed euro area growth to 1% (from 0.8%) and an upward revision for Brazil to 2.1% (from 1.8%).
• Reduction of expectations for future monetary policy loosening, removing one 25-basis-point cut from the loosening cycles of both the Federal Reserve (the US central bank) and the European Central Bank in 2024-25. In contrast, the EIU now expects the Bank of England (the UK central bank) to cut quicker than previously forecast, lowering its rate to 3.5% by end-2025 (compared with 4.25% previously).
• The US dollar effective exchange rate is now forecast to appreciate for a third consecutive year in 2024—the EIU previously expected a mild depreciation. This reflects a stronger depreciation in the yen's value than previously forecast and the fact that the EIU is no longer forecasting euro appreciation.

On the topic of how climate change and AI may threaten global convergence prospects, the report says:

The green transition and technological change will be among the major trends shaping global economic prospects over the next five years. In both cases, they seem set to diminish convergence prospects for developing economies. Poorer countries will be disproportionately affected by climate change and will struggle to secure financing to mitigate its impact. Although we are skeptical about the scale of productivity gains from artificial intelligence (AI), those improvements that do emerge will accrue mainly to developed economies; this will create challenges for countries aiming to move up the manufacturing and services value chains. We still expect some emerging markets to stand out, however, helped by being fairly insulated from geopolitical tensions and rising trade barriers. India is forecast to expand the fastest of any major economy in 2024-28, and Mexico will benefit from nearshoring trends.

Do you agree with the report's findings? How are you preparing your business for a rise in geopolitical risk?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Singapore, Denmark and the US Are Predicted to Have the Best Business Environment From 2024–28

The Economist Intelligence Unit's (EIU) business environment index measures the attractiveness of the business environment in 82 countries and territories, examining 91 indicators spread across 11 different categories. According to the latest business environment index, "Singapore, Denmark and the US will be the three geographies with the best business environment over the next five years." What is more, as reflected in the chart below, "Several west European economies, alongside Canada, Hong Kong and New Zealand, make up the remaining top ten best places in the world to do business. These are all advanced economies and long-standing strong performers in our index, so tend to be safe bets for investments. However, both headline and per capita GDP growth rates are likely to be fairly stable and slow."

The EIU also explains, through the image below, "geographies that see the biggest improvements in score in our index in the next five years (2024-28) compared with the past five years (2019-23). These are not the same economies that will see the fastest real GDP growth in 2024-28—although Qatar and India will grow very strongly—rather, they are places where we expect the most significant policy improvements, infrastructure investment or growth in market opportunities." The UK-based organization adds that its "model suggests that their improvement in our business environment index may subsequently result in an uptick in per-head growth in real GDP, investment spending and FDI."

Regarding those countries already in the EIU's index that scored strongly, the report points out that "Qatar has implemented a US$220bn investment program over the past decade, mainly focused on infrastructure. Its business environment has benefited from the expansion of Hamad International Airport, the road network and tourism infrastructure." Furthermore, Lithuania has long been open to trade and investment, but a major tax reform will soon make it more attractive by extending corporate tax relief and shifting the tax burden away from labor. Greece sees the biggest improvement in the business environment in our index over this period. This reflects the impact of a pro-business government, led by the New Democracy party, now in its second term, that has undertaken reforms, cut taxes and boosted business confidence."

With respect to the world's most populous nation, the EIU says "India is the only single-country market that offers a potential scale comparable to that of China." The South Asia country's "youthful demographic profile promises both strong demand and good labor availability. Alongside solid economic fundamentals, digital infrastructure and favorable demographics, more policy support is being introduced to attract manufacturing investment."

Other geographies further down the EIU's ranking where they expect a strong improvement include Serbia, which "has seen a virtuous circle from its openness to FDI in the past, which has driven growth and attracted further investment, including in higher-value-added sectors. A recent strengthening of macroeconomic policy and institutions supports market stability."

Moreover, "Argentina's sharp improvement in score largely reflects the free-market reforms that we believe the administration of the president, Javier Milei, will introduce—in particular, policies to boost private enterprise and competition and attract foreign investment. In the Dominican Republic, the current Abinader administration, which we expect to be re-elected in May, will continue its business friendly policies. It is encouraging investment into the tourism sector (for example with port upgrades for cruise ships), and improving logistics infrastructure to become a regional transport and distribution hub.

Places with weak business environments but potential for improvement include Kenya, Angola, and Venezuela. As the EIU explains:

Kenya passed a Privatization Act in 2023, which will help to trim the state’s excessively large economic footprint while boosting the private sector. Angola, while close to the bottom of our rankings, is arguably a better place to do business than five years ago, with the Lourenço administration using its improved ties with the US to revamp key legislation, bringing the country's financial sector into line with international standards and reducing the tax burden on the non-oil sector. In contrast, Venezuela is the worst ranked in our index, and will remain so despite a slight improvement after its painful economic collapse.

As I have stated previously on this forum, Southeast Asia has one of the world's most attractive business environment. Among the ten members of the Association of South‑East Asian Nations (ASEAN), the EIU highlights Thailand as a market that "saw a notable improvement in our business environment index in 2021-22, followed by an acceleration in growth in real GDP per head in 2022-23." The report says Thailand was among the first movers in ASEAN "to give special incentives to invest in electric vehicles and green industries. At the same time, many infrastructure projects were being finished—notably the mass transit expansion in the capital, Bangkok—or under way, including as part of the country's Eastern Economic Corridor megadevelopment project." The report adds that "Thailand has benefited from—and encouraged, with preferential policies—the China+1 trend as investors seek to diversify away from China, often towards India and ASEAN."

Do you find this report helpful in determining which countries to invest in or avoid?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Growth Prospects, Risks and Trends in Six Critical Sectors in 2024

The past few years have been turbulent for most companies as the pandemic, soaring commodity prices, high interest rates and political disruption resulted in profits for many and bankruptcy for some. A report published by the Economist Intelligence Unit (EIU) asks: Will conditions stabilize in 2024?

EIU's report provides growth prospects, risks and trends facing six critical sectors in the coming year, as inflation eases but geopolitical tensions remain high. The report argues that the biggest challenge facing businesses next year will be climate change and looks at how experimentation with artificial intelligence will give way to rapid adoption, changing corporate strategies and the nature of work.

Key findings include:

• Climate change will drive demand in sectors relating to mitigation and adaptation. Insurers, companies and governments will struggle to price in the increasing risks.
• EU and US regulations on environmental, social and governance (ESG) reporting will push companies to scrutinize their operations and supply chains. However, skepticism about ESG will harden in the US ahead of November’s presidential elections.
• Corporate concerns over taxation will increase as the OECD introduces its global minimum tax rate and individual governments try to reduce budget deficits and national debt levels.
• Geopolitical tensions and wars will complicate government and corporate responses to all of the above. Investment in supply chains, particularly for technology and the energy transition, will adapt to minimize political risk.
• Generative artificial intelligence will disrupt a few sectors, but most companies will find ways to use AI to increase productivity.

The report also provides key global forecasts for each sector covered:

• Automotive: The automotive industry will face another subdued year in 2024, weighed down by slow consumer spending, high interest rates and disruption to supply chains due to geopolitical tensions. The only bright spot will be the electric vehicles market, with sales expected to soar by 21% to 14.9 million unit as governments and consumers try to mitigate the worsening effects of climate change. The report notes that established carmakers will have to fight hard to hold off competition from China.
• Consumer goods and retail: A slowdown in inflation will bolster retail volume growth by 6.7% in US dollar terms and 2% in volume terms in 2024. However, reduced savings and high food prices, worsened by the effects of climate change, will act as dampeners. The EIU also points out that high food prices will continue to cause problems in Asia.
• Energy: Global energy consumption will grow by 1.8% in 2024, largely driven by strong demand in Asia. Despite still-high prices and unsolved supply chain disruptions, demand for fossil fuels will reach record levels, but demand for renewable energy will rise by 11%.
• Finance: High interest rates will determine the success or failure of almost every part of the financial services sector in 2024. Though painful for borrowers, banks will enjoy strong net interest margins margins and revenue flows until margins begin to narrow mildly in late 2024. Property firms and funds, however, will suffer.
• Healthcare: Healthcare spending will rise by 2% in real US-dollar terms, following two years of decline, as inflation eases. However, resources will remain constrained as governments try to bring down fiscal deficits and public debt levels.
• Telecoms and technology: Geopolitics will continue to affect technology in 2024. The tech battle between the US and China will persist in areas including artificial intelligence (AI), chips and quantum technologies. AI will continue to develop, particularly generative AI, but will encounter challenges from new regulations in the EU and other major jurisdictions, as well as complications from US-China tensions.

I appreciate how the annual industry outlook provides businesses with foresight of the critical global trends and threats that will affect their sector 2024. Which trends and threats are you watching in the coming year?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

A Toolkit for Startups in the Utilities Sector Seeking to Partner With the Public Sector

"Cities in low-and middle-income countries are home to one billion people lacking access to affordable, reliable, safe, and sustainable utility services," Max Cuvellier, GSMA's Head of Mobile for Development, writes in the Forward of a toolkit that was created for startups in the utilities sector that are seeking to partner with the public sector. He adds: "This urban service gap is being exacerbated by rapid urbanization, climate change and widening inequalities posing complex challenges to city authorities, municipalities, and utility service providers."

In its press release announcing the publication of the toolkit, the GSMA, a UK-based organization that represents the interests of mobile operators worldwide, notes: "Partnerships between start-ups and the public sector have emerged as an innovative and impactful way to address critical gaps in essential urban services – particularly when it comes to reaching low-income urban populations in informal settlements. They have the potential to combine the technology, innovative financing, and agility of start-up ventures with the public sector’s scale, service mandate, and resources."

The GSMA's announcement further says: "Over the last decade, through the GSMA Innovation Fund, we have supported more than 100 start-ups and SMEs working across LMICs. In that time, we have observed how central partnerships are to startups' scaling journeys and wider social impact. We have also seen how partnership formation between stakeholders with different organizational cultures, time horizons, and strategic priorities can pose challenges. Meanwhile, there has been little research and few resources tailored towards start-ups and early-stage private sector innovators pursuing partnerships with the public sector."

This toolkit therefore aims to:

1. Highlight the role of start-up-public sector collaboration in the context of the many challenges facing cities in LMICs;
2. To provide a conceptual framework of how to think through, frame, and define startup-public sector partnerships;
3. To offer practical tips and tools to startups navigating these complex partnerships; and
4. To highlight additional resources that might be relevant to those aiming to catalyze startup public sector collaboration.

The toolkit presents the following conclusions:

• Innovation: Digital solutions have demonstrated their value for improving urban services in LMICs. However, more innovation is needed to develop business models that can be deployed on a wide scale and account for the financial constraints of utilities and municipalities, as well the needs of low-income customers.
• Urbanization and climate change: Though the startup-public sector partnership landscape for improved urban utility services is still nascent, trends such as rapid urbanization, urbanization without structural formation, and climate change will mean that municipalities and public utilities will have to collaborate with startups and private sector innovators to close the urban service divide. While there has been more attention placed on the opportunities related to startup-public sector partnerships for urban utility services, it is also clear that there are many barriers to such partnership models, particularly when it comes to taking such partnership models to scale.
• Pioneers and challenges: Examples in countries that have pioneered these partnerships such as Kenya, India, and Bangladesh highlight that start-up-public sector partnerships can support cities in making urban utility service delivery more affordable, reliable, safe, and sustainable. Despite these successes, it is important for startups to be aware of the challenges and complexities associated with public sector collaboration, and better assess where synergies with the public sector lie and how their service can support the public sector in meeting its objectives.
• Collaboration: This toolkit sought to highlight the role of startup-public sector collaboration in the context of many challenges facing cities in LMICs (Section 1), provide a conceptual framework of how to think through, frame, and define startup-public sector partnerships (Section 2), offer practical tips and tools to start-ups navigating these complex partnerships (Section 3), and highlight additional resources that might be relevant to those aiming to catalyze startup-public sector collaboration (Section 4). Given how nascent many partnerships and the wider start-up public sector ecosystem are, it will be critical to continue to conduct research on the developmental, commercial, and social impact of these innovative partnerships, and use case studies to generate granular insights.
• Drivers for change: Trends will continue to drive startup-public sector partnerships for improved urban utility service provision. These include increasing devolution and public sector programs that encourage and incentivize startup participation in urban service delivery, the increased relevance and maturity of circular economy use cases, increased adoption and availability of frontier technologies and digital payments, as well as increased availability of funders and funding models to support multi-stakeholder partnerships.
• Digital Utilities Partnership Hub: The GSMA Digital Utilities program convenes startups, relevant public sector organizations such as state-owned utilities, and other relevant corporates such as MNOs to catalyze innovative partnerships and collaboration for urban utility service provision. Alongside this toolkit, the GSMA Digital Utilities program is launching the Digital Utilities Partnership Hub. The hub is GSMA's comprehensive source of information on the role of digital solutions and innovative partnerships for improved urban service delivery, highlighting key insights and case studies from our work with public and private sector stakeholders over the last decade.
• Support: The GSMA Digital Utilities program is committed to supporting startups and their public sector partners aiming to form, sustain, and scale partnerships for improved urban utility service delivery. To achieve GSMA's objectives, the program engages in:
• De-risking and catalyzing innovative urban utility services: Providing grants to private sector innovators to test and demonstrate the role of digital urban service solutions;
• Research and insights: Generate rigorous evidence on innovative solutions to essential service provision by gathering insights from Innovation Fund grantees and conducting research with partner organizations with deep expertise in utility service provision; Partnership facilitation and convening of key ecosystem stakeholders: Drive replication and scale through convenings and leveraging our own networks as well as those of key partners who work to enable similar solutions; and
• Technical advice to MNOs, municipalities, and utility service providers: Provide advice on the role of digital innovation for improved utility service provision and insights on how to achieve multi-stakeholder partnerships.
• Enabling Forums: GSMA's market engagement team is looking forward to convening public sector stakeholders and startups for our next digital urban utility forums in Bangladesh and Kenya in Q4, and GSMA's program is looking forward to leveraging their strategic partnerships with key enablers and funders such as Imagine H2O Asia, the International Water Association, GOGLA, the World Bank, the Asian Development Bank, the World Resources Institute and other partners to continue to drive public-private collaboration to close the urban service divide.

Do you see value in this toolkit for startups in the utilities sector? What recommendations do you have for how startups and the public sector can partner?

​Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Challenges, Opportunities and Trends to Watch in Seven Sectors in 2023

"The continuing pandemic, the war in Ukraine and high inflation have forced many companies to scale back their forecasts" in 2022, the Economist Intelligence Unit (EIU) notes. Will 2023 will be any better?

The 12th edition of the EIU's annual report forecasts growth and key risks in seven business sectors for 2023, as the war in Ukraine pushes up commodity prices and the cost of living. The report argues that the war has disrupted the recovery from the covid-19 pandemic, and businesses now face increased risks as economies slow or tip into recession, particularly in Europe.

The EIU's report also provides key global forecasts for each of the seven industries:

• Global sales of new vehicles will be flat in 2023, but sales of electric vehicles will rise by 25% to 10.7m units.
• In 2023 retail growth volumes will be respectable at 4.9% in US-dollar terms, which will mainly reflect high inflation. In real terms, global sales will slow or fall in most markets.
• Global energy consumption will rise by just 1.3% as the global economy slows. The energy crisis will force some countries to increase their use of coal or rethink plans to phase out nuclear power.
• Weakening economic output and rising interest rates will lead to more difficult conditions for banks, insurers and fund managers. Formerly fast-growing fintech companies will be hit by the capital-market crunch.
• Global healthcare spending will rise by 4.9% year on year in US-dollar terms, which will mask falling investment in real terms, as countries struggle to cope with continued demand.
• The metaverse will not become a mass-market in 2023, but this will not stop heavy investment into this technology. The drive to standardization and the battle with web3 will be at the forefront.
• International tourism arrivals will rise by 30% as China slowly loosens its covid-19 restrictions. This will follow 60% growth in 2022, but will still leave total arrivals below 2019 levels.

The EIU also presents the following key forecasts for each industry:

Automotive outlook 2023: Bright spots amid stalling growth

• 
  The automotive industry will remain vulnerable to global headwinds in 2023 including the energy crisis, slower global demand and continued supply-chain problems.
• Global new-vehicles sales will remain flat in 2023: new-car sales will rise by 0.9% and new commercial vehicle (CV) sales will fall by 1.3%.
• Sales of electric vehicles (EVs) will be the only bright spot, growing by 25%, but governments will restructure their incentive schemes.
• Governments' focus will turn to charging networks, which are inadequate to meet the expanding EV fleet.
• Autonomous vehicles will take a leap forward, as UN regulators lift their speed limit.

Consumer goods and retail outlook 2023: Retailers respond to pricing pressures

• 
  Inflation will push up global retail sales by a robust 5% in US-dollar terms in 2023, but the lower volume of sales and surging costs will weaken retailers' profits.
• The rollout of automation technologies will offer opportunities to limit wage growth, which means that retail employment is unlikely to return to 2019 levels.
• Online sales growth will slow, but the online share of retail will edge up to about 14% of global retail sales.
• Inflation-wary consumers will prefer to shop at discount stores, helping these retailers to increase their market shares.
• The economic slowdown in China, caused in part by its zero-covid strategy, will mean fresh challenges for global luxury brands already affected by the loss of Chinese tourists.

Energy outlook 2023: Surviving the energy crisis

• 
  Global energy consumption will grow by only 1.3% in 2023 amid a slowing economy.
• Despite decarbonization targets, coal consumption will grow marginally to compensate for gaps in gas supplies.
• More extreme weather events will force many countries to fall back on fossil fuels, delaying the energy transition.
• Renewable energy consumption will surge by about 11%, with Asia leading the way, but investment will weaken.
• The energy crisis will prompt some governments to backtrack on efforts to phase out the use of nuclear power.

Finance outlook 2023: A new test for financial stability

• 
  Weakening economic output and rising interest rates will lead to more difficult conditions for banks, insurers and fund managers in 2023 than in the past two years.
• The impact will be particularly acute in North America and Europe, where governments will offer support. The environment will be tough in Asia as well, although policy rates will rise by less.
• Heavily indebted developing countries will find it harder to refinance foreign debt, driving some to default or require rescues to avoid it. However, the International Monetary Fund will continue its lenient treatment of economies requiring its financing programs.
• The current capital-market crunch will hobble a wide variety of loss-making fintech challengers that sought to outflank incumbents in banking, payments and other activities.

Healthcare outlook 2023: The aftermath of the pandemic

• 
  Healthcare spending will fall in 2023 in real terms, given high inflation and slow economic growth, forcing difficult decisions on how to provide care.
• Digitalization of the healthcare system will continue, but the use of health data will come under stricter regulation in the US, Europe and China.
• Patent cliffs for key drugs and measures to control pharmaceutical pricing in the US, India and elsewhere will force some major pharma companies to spur growth through deals.
• Supply-chain disruptions will continue to push up drugmakers' costs, despite investment in more localized pharmaceutical production.

Technology and telecoms outlook 2023: The battle for digital supremacy

• 
  The metaverse will not become mass-market in 2023, but this will not stop heavy investment in the technology. The drive to standardization and the battle with web3 will be at the forefront.
• Artificial intelligence (AI) will continue to develop, after several breakthroughs in 2022, but will encounter challenges from new regulations in key jurisdictions.
• Semiconductors will continue to be a geopolitical tool between the US and China, involving many other countries. Some companies producing the most advanced products and equipment will benefit.
• Asian telecommunications companies will continue to look for consolidation in 2023. Mobile markets with four or more mobile network operators, such as Sri Lanka, Japan and India, are the most likely to secure deals.

Tourism outlook 2023: Turbulence in the travel industry

• 
  Global tourism arrivals will rise by 30% in 2023, following 60% growth in 2022, but they will still not return to pre-pandemic levels.
• The economic downturn, sanctions on Russia and, above all, China’s zero-covid strategy will be among the factors weighing on the industry.
• Hotels, restaurants and airports will struggle to cope with labor shortages, wage demands, and high food and energy prices.
• Even so, international airlines are expected to return to profitability, benefiting from continued pent-up demand.
• The impact of climate change on the industry will become more apparent, with high temperatures, water shortages and floods forcing tourism destinations to take action.

Useful for companies developing their global business strategy for the coming year, the report presents the following macroeconomic key points:

• The war in Ukraine, combined with lockdowns in China, has exacerbated supply-chain disruptions and pushed up global inflation, forcing EIU to downgrade its forecasts for economic growth in 2023.
• Many governments, particularly in Europe, will be forced to scale back investment in public services, including healthcare, in order to protect households and businesses from the effects of higher prices.
• While some businesses (particularly in commodities sectors) will benefit from high prices, many will be hit by weak demand and high input costs, particularly for energy.
• Profitability will be squeezed, while corporate investment will slow amid rising interest rates.
• However, some companies (notably in pharmaceuticals, technology and retailing) will take advantage of lower stock-market valuations, bankruptcies and government incentives to snap up strategic assets and position themselves for an eventual upturn.

"Amid all this gloom," the EIU encouragingly says "there will be areas of opportunity." Taking the EV market as an example, "online retail sales and tourism will continue to deliver strong growth, particularly in Asia and the Middle East," the report notes. "Innovations—from the metaverse to automated vehicles and data analytics (notably in healthcare)—will attract investment, with some companies also seizing on chances offered by volatile financial markets." I concur that "It will not be an easy year, but it could be a transformative one."

Lastly, The Economist produced a video that looks into which stories may be worth watching in the coming year.

What will you be watching in 2023?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Today's Digital Economy Is the Economy, Says Annual Report on the Global Startup Ecosystem

The entrepreneurial universe was a much smaller place when Startup Genome published its first Global Startup Ecosystem Report (GSER) in 2012. As stated in its latest version of its annual report on the global startup ecosystem, "Six of the top 10 hubs were in the United States, and just one Asian city — Bangalore — broke the top-20 ranking. Four ecosystems accounted for the year's whopping nine unicorns (a term that would not even be coined until 2013). Almost two-thirds of early-stage funding was concentrated in North America."

Ten years later since the publication of its initial report, Startup Genome, a policy advisory and research organization for public and private organizations committed to accelerating the success of their startup ecosystem, says with "$1.65 trillion in funding, 1,227 unicorns, a global pandemic, and massive revolutions in everything from AI and social media to autonomous vehicles and precision medicine later, and the situation is very different. Today, the digital economy is the economy — or at least the economy's future."

Below are the report's key findings:

• The same five ecosystems remain at the top of the ranking as in 2020 and 2021, but Beijing has dropped one place, with Boston taking its former place at #4. Silicon Valley is #1, followed by New York City and London tied at #2, Boston at #4, and Beijing at #5.
• Seoul entered the global top 10 ecosystems for the first time, up six places from #16 in 2021 and #20 in 2020.
• Several Indian ecosystems have risen in the rankings, most notably Delhi, which is 11 places higher than in 2021, entering the top 30 for the first time at #26. Bangalore has moved up one place from last year, to #22.
• Overall, China's ecosystems have declined in the rankings, a reflection of the relative decline in early-stage funding in comparison to other ecosystems.
• Helsinki has risen more than 20 places from last year, joining the runners-up category at joint #35.
• A record 540 companies achieved unicorn status in 2021, up from 150 in 2020.
• In 2021, Brazil saw 237% growth in the dollar amount of Series B+ rounds compared to 2020. The nation's total exit amount for 2021 was $49 billion, a huge leap from $1 billion in 2020.
• Asia experienced a 312% increase in the dollar amount of exits over $50 million from 2020 to 2021.
• In 2021, the dollar amount of exits in London grew 413% from 2020. The ecosystem's Series B+ rounds increased 162% in terms of dollar amount from 2020, and it saw 55% more $50 million+ exits in 2021 versus 2020.

With respect to the top 100 emerging ecosystems, the Startup Genome explains that these "ecosystems are startup communities at earlier stages of growth, and our ranking methodology is adapted to reflect this, to showcase the strengths in these ecosystems that have high potential to be global top performers in the coming years." Key findings from the top 100 emerging ecosystems include:

• Oslo is in the top 20 Emerging Ecosystems (#19), a huge leap of over 20 places from last year, and a reflection of two unicorns — industrial IoT platform Cognite and online grocery Oda — helping to increase its Market Reach.
• Minneapolis has moved up 18 places from last year, to #4. Six exits over $50 million and one $1 billion+ exit helped to improve its Performance score.
• Manchester-Liverpool has moved up eight places from 2021, to #6. A $1 billion+ exit and Matillion — an integration platform for cloud data warehouses — becoming a unicorn add $7.8 billion to its Ecosystem Value.
• India's recent success is reflected in both Chennai (tied #31–40) and Pune (tied #51–60) moving up in the rankings. The Chennai ecosystem saw a $1 billion exit in business software startup Freshworks, which moved to Silicon Valley after founding in India.
• Mumbai's has moved out of the Emerging Ecosystems ranking and into the global overall rankings (tied #36). Three exits over $1 billion (including Nykka's $7 billion valuation at IPO) and six unicorns contributed to the move.
• Pittsburgh moved up 10 spots from last year to #13, aided by Duolingo's $3.6 billion exit.
• Prague has moved up more than 40 spots, to tied #41-50, thanks to three exits over $50 million and one over $1 billion. These big exits are helping to increase its ranking in Performance and Market Reach.

"The top 100 Emerging Ecosystems are collectively worth over $1 trillion in Ecosystem Value," the report notes, "which is a 96% increase from last year. Europe and North America still boast the majority of emerging ecosystems, and Latin America, MENA, and Africa have held steady in the number of ecosystems in the top 100 from last year, with five, four, and three respectively." What is more, "Asia has 17 entries in the Emerging Ecosystems ranking versus 18 last year. Oceania has the same two entries in the top 100 as last year: New Zealand and Brisbane."

The report also provides an important analysis on the global startup sub-sector, which include the following key findings:

• Since the GSER 2021, there has been an overall increase in the growth of exits and a general slowing in the growth of Series A rounds. The increase in the growth of exits has helped investors hold dry powder (marketable securities that are highly liquid and considered cash-like), as revealed in the record high VC investment amounts.
• Cybersecurity has received growing attention, as a side effect of the acceleration in digital transformation. Exit growth in this sub-sector has increased by 14% since the GSER 2021.
• All sub-sectors have accelerated in growth overall, with the largest growth in artificial intelligence (AI) & big data (BD), Blockchain, Fintech, and Advanced Manufacturing.
• AI & BD is becoming an overarching vertical that is increasingly overlapping with other industries both in terms of the amount of investment and count. In 2014, the overlap in the investment amount was outperforming the count, showing fewer investments in AI and tech. In 2020, the trend is the opposite, indicating competition among global AI startups to attract funds.
• Cleantech is the only sub-sector that has seen a considerable increase in count at both Series A (by 35%) and exit (by 12%, both 2016-2017 vs. 2020-2021), indicating increased innovation and investor focus on this topic.
• Advanced Manufacturing has grown by 70% in early-stage funding (2016-2017 vs. 2020-2021), driven by supply chain needs and a focus on improving efficiency and productivity through automation, monitoring, and failure prediction.

Having been involved with startups for close to 30 years, I concur with JF Gauthier, Startup Genome's founder and chief executive, that "The world of tech startups is changing. More importantly, tech startups are changing the world." The coronavirus pandemic accelerated the development of the digital economy. And as previously stated, today's digital economy is the economy.

What aspects of the report did find of particular interest or relevance?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

While Mobile Technology Offers Life-Changing Benefits, Research Shows Many Persons With Disabilities Remain Unconnected and Digitally Excluded

According to a fact sheet produced by the World Health Organization (WHO), one billion people, or 15 percent of the global population, live with some form of disability. And the number of people living with disability are dramatically increasing due to demographic trends and increases in chronic health conditions, among other causes. In consideration of this information provided by the WHO, it was with great interest to read a report produced by the GSM Association (GSMA), a UK-based organization that represents the interests of mobile operators worldwide, that says "Mobile devices and services offer life-changing benefits to persons with disabilities, such as enabling access to basic services and independent living. Despite this potential many persons with disabilities remain unconnected and digitally excluded. It is estimated that around 90 percent do not have adequate access to the assistive technologies (AT) they require. Mobile-based ATs, especially smartphones, could be a valuable and cost-effective tool for persons with disabilities."

The report presents key insights into the mobile disability gap. Presenting research from the following seven low- and middle-income countries (LMIC): Algeria, Bangladesh, Guatemala, India, Kenya, Nigeria, and Pakistan, GSMA's research "revealed that persons with disabilities are less likely to own a mobile, especially a smartphone, and are even less likely to use, or be aware of, mobile internet."

In explaining the research's methodology, the GSMA says "The Washington Group Short Set of Questions was used to identify persons with disabilities. Respondents who reported that they had 'a lot of difficulty' or 'cannot do at all' in at least one of the functional domains were considered a person with disabilities revealed that persons with disabilities."

Key findings of the report include:

1. "Persons with disabilities have lower levels of mobile ownership than non-disabled persons in all countries surveyed. Bangladesh has the widest gap, where persons with disabilities are 55 percent less likely to own a mobile phone than non-disabled persons, and the smallest gap is in Kenya and Pakistan at 11 percent.
2. "Despite the life-enhancing potential of smartphones as an assistive technology and a gateway to digital inclusion, persons with disabilities are significantly less likely to own a smartphone than non-disabled persons. The disability gap in smartphone ownership is wider than the gap in overall mobile ownership in most of the survey countries.
3. "There is a significant disability gap in mobile internet use. In each of the survey countries, persons with disabilities are significantly less likely to use mobile internet than non-disabled persons.
4. "Across all survey countries, fewer persons with disabilities are aware of the mobile internet than non-disabled persons. This is a significant barrier that prevents persons with disabilities from using and benefitting from mobile internet.
5. "In India and Pakistan, mobile users with disabilities who are aware of mobile internet but do not use it reported that a lack of literacy and skills is the main barrier to usage. Other major barriers include lack of perceived relevance, safety and security and affordability."

The GSMA correctly asserts that "Key stakeholders in the mobile industry have a critical role to play in closing the mobile disability gap and ensuring digital inclusion for all. This includes policymakers, international organizations, non-governmental organizations, organizations for persons with disabilities (OPDs), mobile operators and other ecosystem players, including start-ups and device manufacturers."

What is more, the report offers the following recommendations for stakeholders interested in eliminating the mobile disability gap:

• "Understand the mobile disability gap and how to reach and serve persons with disabilities better. Accurate and reliable disability-disaggregated data is a crucial tool for stakeholders to understand and address barriers to the digital inclusion of persons with disabilities. However, in most markets, disability-disaggregated data related to the access and use of mobile-enabled products and services is lacking, and has hampered digital inclusion efforts. It is critical that policymakers, the public and private sectors and digital players invest in, and collaborate on, accurate, ethical and effective data collection. This will help to monitor progress and inform the design of inclusive and relevant products, services and innovations for persons with disabilities.
• "Raise awareness of mobile internet and its benefits for persons with disabilities. Awareness of mobile internet is lower among persons with disabilities than non-disabled persons, limiting their potential usage of mobile internet. To raise awareness of the benefits of mobile internet and smartphones as an assistive technology, stakeholders can develop campaigns targeting persons with disabilities and explore partnerships with OPDs to reach persons with disabilities and showcase how mobile services are relevant to their lives.
• "Develop inclusive products and services that meet the diverse needs of persons with disabilities. Once persons with disabilities are aware of mobile internet and its benefits, it is important that they have access to relevant products and services that meet their needs. It is important that stakeholders ensure that existing products are accessible, and that new content, products and services are created with persons with disabilities in mind (e.g. user-centered design and inclusive or universal design practices) to improve accessibility and usability.
• "Build the digital skills of persons with disabilities. Many persons with disabilities are digitally excluded because they do not know how to use mobile and mobile internet in a way that meets their needs. Stakeholders can support the delivery of mobile digital skills programs that train persons with disabilities (and their caregivers/relatives) how to use mobile internet to meet their needs. They can also explore partnerships with OPDs or other relevant organizations to teach persons with disabilities how to access and use accessibility features and mobile-enabled products and services. Stakeholders can use resources such as the GSMA's Mobile Internet Skills Training Toolkit (MISTT) to train people how to access and use mobile internet services, including accessibility features. The toolkit is a visual, easy-to-follow guide that helps trainers demonstrate the functionality and value of the internet on internet-enabled mobile phones.
• "Ensure products and services are affordable for persons with disabilities. Smartphones, which typically provide the most accessibility features and drive substantially higher mobile internet use, are often unaffordable for persons with disabilities. Mobile operators can design solutions to make internet-enabled handsets more affordable to persons with disabilities, such as innovative financing models and 'data-light' accessible versions of mobile apps and services."

A more detailed set of recommendations for the mobile industry can be found in the GSMA's Principles for Driving the Digital Inclusion of Persons with Disabilities.

Do you agree with the recommendations for eliminating the mobile disability gap? What inclusive products and services are you developing to meet the diverse needs of persons with disabilities?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

2022 Will (Hopefully) Be a Year of Recovery and Renewal for Economies and Businesses Affected by Covid-19

"2021 was supposed to be a year of recovery for economies and businesses that had been affected by the coronavirus (Covid-19) pandemic," according to The Economist Intelligence Unit's annual report that examines the opportunities and challenges ahead for seven sectors of the global economy: automotive; consumer goods and retailing; energy; financial services; healthcare and pharmaceuticals; technology and telecoms; and tourism. "However, it has not been a straightforward rebound. Although coronavirus vaccines allowed many countries to ease lockdowns and begin a recovery, cases remained stubbornly high, albeit with an improved recovery rate. International borders remained either shut or subject to cumbersome testing requirements. One knock-on effect was supply-chain disruptions that hampered companies' ability to meet consumer demand, pushing up prices. Many of these problems will persist into 2022."

Businesses operating in these seven sectors should note that "[g]rowth prospects for all these sectors in 2022 will depend on their respective base levels. Some sectors—notably, telecoms and pharmaceuticals—thrived during the pandemic, but will need to navigate evolving consumer demands, as well as increased competition and regulation going forwards. Some sectors—notably, automotive and tourism—suffered slumps and will struggle to deal with the aftermath. For the remainder, the situation and outlook remain mixed, with companies pushing against headwinds to reach areas of opportunity."

The report presents the following key forecasts:

• Supply-chain disruption will make it harder for manufacturers and retailers to meet recovering demand, dampening sales forecasts for both consumer goods and automotive.
• High prices will push up interest rates, which could raise bad debt levels and dampen demand. However, some consumer companies and banks will turn higher prices to their advantage.
• New technologies - both digital and non-digital - will offer new opportunities, but will also attract more attention from regulators keen to ensure a level playing field. Health apps will be among those affected.
• Companies will need to prepare for changes in tax regulation, following a global deal to set a minimum corporate tax rate. Although this legislation may be derailed, efforts to collect taxes are increasing.
• Amid efforts to combat climate change, companies will come under more pressure to cut emissions and meet more standardized reporting requirements. This will affect their investment strategies, particularly in the oil and coal sectors.

In addition, below are the key forecasts as they relate to each of the aforementioned seven sectors of the global economy:

Automotive in 2022: back to near-normal

• Global sales of new vehicles will rise by 7.5% in 2022, taking them back past 2019 levels. The recovery will be led by Asia and North America.
• Many vehicle makers will still struggle to meet recovering demand amid continuing supply-chain disruptions.
• Global sales of new electric vehicles (EVs) will continue to soar, rising by 51%. New emissions rules will force carmakers to make far-reaching decisions about their fossil-fuel models.

Consumer goods in 2022: knots in the supply chain

• Global retail sales will recover to 2019 levels in volume terms, but coronavirus (Covid-19) cases, inflationary pressures and slow job growth will pose challenges.
• Online shopping will grow at a slower pace in 2022 as lockdowns lift, but will still account for 17% of global retail sales.
• Higher supply-chain costs will motivate businesses to wean consumers off discount schemes and focus on higher-margin premium products.

Energy in 2022: transition time

• Global energy consumption will rise by 2.2% as economies recover from the impact of the pandemic. All types of energy, apart from nuclear power, will benefit.
• Energy prices will stay firmer than in recent years, as demand recovers and supply bottlenecks continue to disrupt power generation.
• Many energy companies will need to undertake an urgent review of their strategies in 2022, as governments and investors ramp up pressure to cut emissions.

Finance in 2022: gusty tailwinds

• Economic recovery and rising interest rates will boost prospects for many financial firms in 2022, provided bad loans remain at manageable levels.
• Developing markets will take longer to regain their appeal than developed ones. Regulatory uncertainties in China will throw up challenges in the world’s fastest-growing market for financial services.
• Green finance will move towards center stage, as companies and investors try to live up to pledges made at the COP26 climate summit.

Healthcare in 2022: the aftermath of coronavirus

• Global healthcare spending growth will slow to 4.1%, despite rising costs, as governments start to assess the economic damage wreaked by the pandemic.
• Vaccinating the world against Covid-19 (coronavirus) will remain a core priority. However, healthcare systems will also need to start tackling a backlog of non-coronavirus care.
• Healthcare is not exempt from supply-chain problems, and governments will push ahead with regulation designed to increase resilience and lower costs.

Technology and telecoms in 2022: geopolitical tensions

• Of 60 major telecoms markets, 16 will launch 5G services in 2022 (see map below), but challenges in spectrum availability and pricing will cause delays.
• Technology and politics will continue to be interlinked. The semiconductor shortage will persist, making onshoring of chip production a strategic priority for countries.
• Governments will tighten regulations to boost cyber security, which will be the main short-term risk to digitalization progress, but discrepancies between countries will often dilute the impact.

Tourism in 2022: a shaky recovery

• International arrivals will recover some ground but fail to return to 2019 levels, with business travel likely to remain depressed.
• Differing levels of border control and variations in vaccine passports will continue to make international travel difficult in 2022, although domestic tourism will fill some gaps.
• Compliance with climate-change regulations, as well as higher fuel prices and wages, will increase air-travel costs in 2022. This will eventually lead to airline mergers, airport closures and higher ticket prices.

Lastly, with respect to its macroeconomic forecast, The EIU asserts that "the global economic recovery will continue in 2022, with real GDP expanding by 4.1% at market exchange rates, after rebounding by an estimated 5.4% in 2021. Of the G20 countries, China and Turkey were the only two not to shrink in 2020 and will continue to post firm growth. Eight more, led by the US, have already regained their 2019 GDP levels in real terms, following a strong rebound. The remaining ten, including EU countries and Japan, will regain pre-pandemic levels in 2022, having lost two years of growth."

The report, however, points out that the "recovery could still be derailed if the pandemic flares up again. Persistent supply-chain disruptions could keep commodity prices elevated. This will benefit commodity-dependent countries, but will fuel inflation. That, in turn, will lead to tightening monetary policy, with impacts on stock markets, banks, companies and governments. Geopolitics will remain fraught too: the EIU sees an escalation in US-China tensions as the biggest global risk."

Twelve months ago as my colleagues and prepared to close-out 2020, we anticipated 2021 would be a year of recovery and renewal. While some sectors such as technology and pharmaceuticals have seen a healthy rebound, the automotive and tourism sectors struggled during the past year. And the consumer goods, energy, finance, and healthcare sectors had a mixed year as they seek out new areas of opportunity. In the coming year, we will be watching the global vaccination rate, the rise of any potential variants of covid-19, and how governments respond to new outbreaks. We will also monitor how governments and central banks continue their efforts to stimulate economic growth while curtailing inflationary pressure.

What will you be watching in 2022?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

While a Slow, Painful Recovery to the Global Economy Is Predicted in 2021, the EIU Says Digitalization Will Present Opportunities for Certain Sectors

While I am always mindful of risks that can impact a company's operations, a pandemic is not often a risk most corporate leaders prepare for. The coronavirus pandemic's grip on the global economy was certainly not in consideration when I published a post about The Economist Intelligence Unit's (The EIU) Industries in 2020 report. One year later, The EIU's report entitled Industries in 2021: A Slow, Painful Recovery, which gives its outlook for six global industries: automotive, consumer goods and retail, energy, financial services, healthcare and pharmaceuticals, and telecommunications, says "[m]uch of what we predicted in last year's report turned out to be wrong. As we all know, the coronavirus (Covid-19) pandemic overturned assumptions about the development of the global economy and destroyed any hope of steady growth for many industries. This year more uncertainties and risks lie ahead as the world stutters into a recovery."

The report explains: "With their finances already weakened by the pandemic and resulting lockdowns, many companies will not be able to take advantage of a recovery that is likely to be fitful. The consumer goods and retail sector in particular is likely to see a wave of bankruptcies and store closures as more business goes online. The financial sector will also have to cope with a sharp rise in non-performing loans that, in some cases, may overwhelm the provisions that banks have put in place. Restructuring will reshape even those industries, such as telecoms, which have emerged from the pandemic relatively unscathed. However, there will be some winners from this process as markets consolidate around surviving companies and opportunities open up for new business models."

What is more, "With many industries lobbying for support, governments whose tax revenues are already depleted will have to focus support and incentives on sectors with the strongest growth prospects, or those that feed into long-term policy goals. These are likely to include protecting jobs, promoting investment (particularly in innovation) and tackling climate change."

Regarding the energy sector, The EIU maintains "policy will focus on increasing the use of renewable energy. Even Poland, previously a staunch defender of its coal sector, will begin a phase-out, while markets in South-East Asia will see particularly strong growth in renewables. In the automotive sector, generous incentives will continue to encourage purchases of electric vehicles, particularly in Europe, although countries such as France will start to trim back funding as the sector develops. China, meanwhile, will shift its focus towards hydrogen fuel cell vehicles, previously an area where Japan led the way."

On the topic of trade spats and international disputes, the report suggests: "As countries and companies try to rebuild, their focus is likely to turn inwards, with domestic markets and operations becoming a priority. However, as pressure to reshore production and secure supply chains increases, this will have implications at an international level, too."

For example, "In the telecoms sector, this has particular implications for Huawei, a Chinese telecoms company that is now being targeted by US export controls. The technology war will also affect other sectors, including automotive and consumer electronics, while in the financial services sector concerns over China's intentions could undermine Hong Kong's role as an international hub. The UK, meanwhile, will face its own international challenges, as Brexit finally takes full effect on January 1st, drastically changing the business environment for financial firms, automakers and many others."

"Digitalization," according to The EIU, "will affect nearly every industry sector. In the consumer goods and retail sector (and even the automotive sector) the growth of online shopping will generate new companies and new jobs, making up for some of the cuts seen in real-world retailing. However, online retailers will not have it all their own way, with cash-strapped governments keen to raise digital taxes that are likely to exacerbate international tensions."

Moreover, "The rise in online shopping and other activity will also fuel the growth of new financial services, starting with digital payments and progressing into digital currencies, including national ones in China and elsewhere. Even healthcare providers, spurred by the pandemic and social distancing measures, are expanding their online services, with new regulations widening access to telehealth—while at the same time reining back its use where it could affect patient care."

The EIU's "key global forecasts for the six industries covered by this report are:

• "Asia will be the first region to rebound to 2019 levels in most industries, given its relatively shallow slump in 2020;
• "Latin America and Africa will see the slowest recovery, held back by low commodity prices and high debt levels;
• "new-car sales will recover to grow by 15% globally, while commercial vehicle sales will rise by 16%, but only China, Ukraine and Turkey will see sales return to their 2019 levels;
• "global retail sales volumes will grow by 3% but still fall 2% short of 2019 levels;
• "energy consumption will rebound partially—by 2.6% worldwide—but demand for oil and coal will remain lower than in 2019 as the use of renewables surges ahead;
• "financial firms will face weak demand for their services amid mounting debt defaults, while their income will be hurt by low interest rates;
• "healthcare expenditure, which dipped in 2020 despite spending on the pandemic, will surpass 2019 levels, rising by 7% worldwide in US dollar terms; and
• "global mobile subscriptions, which also dipped in 2020, will increase by 3%, again surpassing 2019 levels."

The EIU held a webinar, which is available through this link or the video embedded below, features industry analysts who comment on specific aspects of the report. While I recommend watching the session in its entirety, one point worth mentioning is the presentation of how the six industries covered by the report will be impacted by four key trends:

Job loses and bankruptcies will mount

• Automotive
• Consumer goods and retail

Some governments will aim to support a green recovery

• Automotive
• Energy

Trade spats and international disputes will remain disruptive

• Financial services
• Telecoms

Digitalization will offer the biggest opportunities

• Consumer goods and retail
• Financial services
• Healthcare and pharmaceuticals
• Telecoms

"As these decidedly mixed forecasts demonstrate," the report notes "there will be nothing straightforward about the global economic and business recovery in 2021. Even if the coronavirus is brought under control, many companies will face challenges that they will not be able to meet. Nevertheless, there will also be opportunities on offer for companies that are nimble enough to take advantage of rapid changes in the economic, business and political environment."

What are your predictions for 2021?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.