Report Delves Into the Transformative Power of Digital Innovation and Its Role in Driving Economic Prosperity

GSMA Intelligence published an insightful report that delves into the transformative power of digital innovation and its role in driving economic prosperity. Titled Economic growth and the digital transformation of enterprises, the report notes that "Industries worldwide are undergoing a profound digital transformation, reshaping the way businesses operate and interact. Connectivity, which is expected to account for 21% of enterprise digital transformation spending from 2024 to 2030, has become a critical enabler of this transformation. Businesses that can embrace advanced technologies that leverage connectivity, such as AI, IoT, robotics, AR/VR, big data analytics and cloud computing, can enhance operational efficiency, improve customer experiences and unlock new revenue streams."

Regarding how digitalization of enterprises is accelerating, the report says "This trend has been further accelerated by global challenges, such as the Covid-19 pandemic, climate change, economic uncertainty and geopolitical tensions. These challenges have all underscored the critical importance of digital infrastructure in ensuring business resilience and continuity."

The report's key findings are listed below:

• 5G solutions are amplifying digital transformation, but enterprise adoption is still limited. Initial 5G adoption has unlocked new use cases and accelerated digitalization for early adopters across industries. But the reach of enterprise adoption of 5G remains limited. For example, according to GSMA Intelligence’s Digital Transformation Survey 2024, only 2% of surveyed enterprises had deployed 4G/5G private networks.
• Digital transformation's economic impacts are not yet fully understood, but this report bridges the gap. While the economic impacts of mobile connectivity are well documented, the broader effects of digital transformation across sectors remain less understood. This report seeks to bridge this gap by offering empirical evidence on how the latest wave of digital technologies drives economic growth.
• Mobile technologies and digital transformation will boost global value added by nearly $11 trillion in 2030. The continued integration of digital technologies in enterprises will increase mobile’s contribution to global GDP from 5.8% in 2024, equivalent to $6.5 trillion, to 8.4% by 2030, equivalent to almost $11 trillion.
• Four sectors (manufacturing, financial services, automotive and aviation) will account for 34% of this impact. By 2030, advanced connectivity could enable manufacturers to achieve over $400 billion in annual cost savings, while the automotive sector could save nearly $45 billion in quality-related costs. Airports stand to reduce nearly $10 billion in flight-delay costs, and financial institutions could see a revenue uplift of over $140 billion through enhanced process automation.
• Realizing 5G's transformative potential requires collective stakeholder action. 5G could unleash the full potential of digital transformation, driving significant economic impact and commercial value. But the benefits cannot be realized without action from all stakeholders. Policymakers, operators and the broader ecosystem must collaborate to overcome barriers to enterprise adoption, including high implementation costs, device compatibility issues and often a lack of internal technical expertise within enterprises.

In writing the report's Foreword, Richard Cockle, Head of GSMA Foundry and Connected Industries at GSMA, explains that "The digital transformation journey is not merely about adopting new technologies; it is about reimagining business models, enhancing customer experiences and fostering a culture of continuous innovation. Enterprises that embrace this transformation, working in partnership with mobile operators, are better positioned to navigate the complexities of the modern economy, unlock new opportunities and achieve sustainable growth."

I agree with Mr. Cockle's concluding paragraph that "Together, let us embrace the opportunities that digital transformation presents and work towards a future where economic growth and technological innovation go hand in hand."

How is your business embracing the transformative power of digital innovation?

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.

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.

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.

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.

Understanding How the War in Ukraine Will Change Business

Since Russia's unprovoked invasion of Ukraine on Feb. 24th, 2022, I have held several conversations with colleagues asking how the war will change business. A report published by The Economist Intelligence Unit (The EIU) aims to address this question by noting: "Although primarily a humanitarian disaster, the Russia-Ukraine conflict will also accelerate changes already provoked by the pandemic, US-China tensions and climate change."

The EIU presents five ways in which the war in Ukraine will change business:

1. The war will add to supply-chain disruptions in sectors such as automotive, increasing the pressure for localization.
2. A surge in energy and other commodity prices will hasten public- and private-sector efforts to improve food security.
3. The investment needed to reduce Europe's reliance on Russian energy will affect funding for clean-energy investments in developing countries.
4. Financial sanctions against Russia may accelerate the transition from US dollar-backed financial systems to interoperable central bank digital currencies (CBDCs).
5. Geopolitical tensions over technology (already central to the US-China trade war) will intensify as Russia curbs internet access and faces technology sanctions.

Among the five points presented by The EIU, three are worth exploring more deeply. "Supply chains have already been disrupted by the pandemic, as well as the earlier US-China trade war," the report says. "The difficulties caused by the Russia-Ukraine war will prolong these disruptions and place added pressure on companies in sectors such as automotive to shorten their supply chains and build resilience. This may mean increasing stock of major components, reining in just-in-time production norms or investing in more local suppliers."

As for price increases in commodities driving adoption of sustainable food policies, "The war in Ukraine will keep fuel and commodity prices elevated for much of the year. This will not only raise business costs, but will also heighten existing concerns about energy and food security." Moreover, "The war is already forcing several governments to examine their food and agricultural policies closely, not just in Europe, but also in the Middle East, Singapore and China, among others."

In a separate article, The EIU explains says it expects the "average grain prices to rise by almost a third this year, on top of the 40% increase recorded in 2021" and "prices of sunflower seed oil to increase rather than fall in 2022, as originally forecast before Russia's invasion; prices increased by nearly 60% in 2021."

With respect technology becoming increasingly geopolitical and regionalized, this is happening in two ways. "First," according to the report, "access to technology is seen as a competitive advantage for countries, as evident in US attitudes towards semiconductors. Because the chip sector is fragmented and the product is complex, every actor will need to use US equipment at some point; therefore, any US technology sanction makes a country or company unable to purchase semiconductors."

As for the second way, "the internet is becoming more national and less global. China has driven this change by using a national firewall to restrict access to content that its government deems dangerous—a measure that Russia wants to adopt. The EU, through its values-led approach to data privacy and regulation of artificial intelligence, has also created regional barriers to the internet."

However, the report importantly notes: "This regionalization of the internet will not necessarily lead to a 'splinternet,' where different systems are completely separate and not interoperable. The broader battle is between the US, which wants to retain the multistakeholder governance model of the internet (open, decentralized and industry-led), and China, which wants a cyber-sovereignty model (closed, centralized and country-led). However, the tensions are not just between democracies and autocracies, but also between blocs, as the relationship between the US and EU shows."

The EIU published a subsequent report presenting ten ways the war in Ukraine will change the world:

1. Russia's war in Ukraine will bring about a new division of Europe.
2. Russia's violation of Ukraine's sovereignty signals the end of the post-cold war order.
3. The war in Ukraine will deepen Russia's strategic alliance with China.
4. Russia's actions accelerate the bifurcation of the world into two hostile, competing camps.
5. A renewed focus on European security will constrain the US tilt to Asia.
6. The war in Ukraine will accelerate a global arms race.
7. Germany may begin to play a more assertive role in European security policy.
8. Europe will be forced to decide where it stands in the new global order.
9. The challenge to global democracy will become more pronounced.
10. The war in Ukraine will embolden others and inflame existing conflicts.

With respect to the first point of Russia's war bringing out a new division of Europe, The EIU points out that "Russia's brutal invasion aims to destroy Ukraine's sovereignty and prevent the country from ever joining NATO or the EU. Russia intends to annex at least part of Ukraine, thereby creating a buffer zone between Russia and the West that also includes Belarus and Kazakhstan." Moreover, "Russia's repudiation of the Western-led 'rules based order' signals a turning away from Europe and the creation of a new division of the continent, three decades after the fall of the Berlin Wall."

More troubling is how Russia's actions will accelerate the bifurcation of the world into two hostile, competing camps. As the report explains, "China and the West have been competing for several years to establish dominance in the industries and technologies of the future and to prepare the ground for a future decoupling. The coronavirus pandemic has reinforced this trend, fostering a move towards regionalization and away from globalization." What is more, "By bringing about a decisive rupture with the West, Russia's actions will speed up the division of the world between two rival poles. Some countries will take sides, but many others will seek to maintain a foot in both camps. As time goes on, this balancing act will become increasingly difficult."

I appreciate how The EIU's first report explores the impact Russia's unprovoked war with Ukraine will have on key global industry sectors and the risks these present to businesses. The second analysis also serves as a useful tool in outlining how the conflict will influence the global balance of power and lead to a further unravelling of the post-Cold War order. The situation in eastern Europe has increased several risk factors businesses will need to navigate.

How is the war affecting your business?

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.

'China Cements Its Position as a Global Leader in 5G,' Says GSMA Report

"2019 was a pivotal year for the Chinese mobile industry," according to a report, The Mobile Economy China 2020, authored by GSMA Intelligence, the research and consulting arm of the GSMA, a UK-based trade organization. "The country was one of the first globally to launch 5G services. With operators and enterprises forging ahead in the development of 5G services, and growing consumer excitement, China has cemented its position as a global leader in 5G."

While 4G is "the dominant mobile technology across China, accounting for more than 80% of total connections (excluding licensed cellular IoT) ... 4G's share will peak in 2020 (at 82%) as 5G grows significantly." The report, available in English and Chinese, adds that 70% of global 5G connections in 2020 will come from China.

In explaining on how enterprises are taking tentative steps into the 5G era, the report says:

Companies across a range of verticals (such as manufacturing, power generation and aerospace) are evaluating their options for digitizing product assembly and general operations management. This presents an opportunity for operators that can offer 5G with complementary infrastructure for low-latency services (such as data centers close to the edge) and analytics. However, while a majority of enterprises recognize the benefits of speed gains brought about by 5G, other improvements (such as network slicing, edge computing and low-latency services) are not widely appreciated, with many believing 4G is 'good enough.' China is a clear exception in this regard: early partnerships and trials from local operators have paid dividends, as evidenced by the widespread intent among companies in the country's industrial sector to use 5G.

On the topic of edge computing, which Wikipedia defines as "a distributed computing paradigm which brings computation and data storage closer to the location where it is needed, to improve response times and save bandwidth," the report suggests "[e]dge computing is moving from concept to early-stage deployments as new use cases demand a more decentralized approach to computing and networking than a traditional, fully cloud-based model. Driven by the government's ambition to make China a global leader of new technologies and Industry 4.0, the country's ecosystem is looking to spearhead the development of edge computing."

As reflected in the image the right, edge computing will facilitate the ramp-up of various industries such as autonomous vehicles, gaming and e-sports.

Regarding mobile delivering social impact, the report says that "[w]ith 1.2 billion unique subscribers across China, and nearly 1.5 billion people covered by a mobile network, mobile is increasingly being used to access an array of life-enhancing services that contribute to and catalyze the achievement of the UN Sustainable Development Goals (SDGs)."

Moreover, "In China, SDG 9 (Industry, Innovation and Infrastructure) remains the most impacted goal: 99% of the population are covered by 4G networks, underscoring mobile’s role in providing critical infrastructure to spur innovation as well as inclusive and sustainable development. Mobile is also playing a key role in providing increased access to quality education (SDG 4), while helping reduce inequalities (SDG 10)."

Lastly, enacting effective policies will be essential to creating a thriving 5G future in China. "The success of 5G heavily relies on government support for timely access to the right amount and type of affordable spectrum, and under the right conditions," the report explains. "5G will need a comprehensive range of spectrum across sub-1 GHz, 1–6 GHz and above 6 GHz to satisfy the requirements of 5G services in the future. The lower- and mid-frequency ranges are key to improving 5G coverage, speed and latency compared to 4G, while spectrum above 24 GHz – mmWave spectrum – will be a critical component to enable super high speeds and ultra-low-latency applications."

What is more, "Since mmWave spectrum will play a vital role in the future success of 5G in China, particularly in the manufacturing sector, the GSMA recommends the following policy considerations:

• "Continue to provide policy incentives by reducing frequency utilization fees for mmWave spectrum similar to those for the 2.6, 3.4–3.6 and 4.8–5.0 GHz bands.
• "Allocate large and contiguous blocks of spectrum in the mmWave bands where possible – around 1 GHz per operator.
• "Avoid setting aside spectrum for verticals in priority mmWave bands (e.g. 26 and 40 GHz). Sharing approaches such as leasing are better options where verticals require access to spectrum."

Infographic: GSMA Intelligence

How is your business preparing to take advantage of the opportunities presented with the rollout of 5G in China?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.

The Use of Green Sukuk Grows to Support Environmental Projects

"If the world is to avoid catastrophic climate change, trillions of dollars of sustainable investments will need to be made every year between now and 2050," writes Melanie Noronha, senior editor for The Economist Intelligence Unit's (The EIU) thought leadership division in EMEA. "Much will have to come from capital markets where investors have already demonstrated an appetite for 'green bonds' which tie the proceeds to environmental projects. There are hopes that sukuk—a sharia-compliant financial instrument similar to a bond—could also be channeled towards environmental investments."

Supported by the Dubai Islamic Economy Development Center, Ms. Noronha's article, "A new shade of green: Sukuk for sustainability," is the first in a series by The EIU on "Innovation in the Islamic Economy." According to the article, "The first shoots of a similar 'green' instrument in the Islamic finance sector emerged not too long ago. In 2017, renewable energy group Tadau Energy issued the first 'green' sukuk, raising US$59m to finance a solar power plant in Malaysia, the birthplace of conventional sukuk in the 1990s. Indonesia issued sovereign green sukuk worth US$1.25bn in 2018 and US$750m in 2019 to fund environment-related projects."

Moreover, "There is activity in the Arabian Gulf countries as well. In 2019 Majid Al Futtaim, a UAE-based retail company, raised US$600m with the region's first corporate green sukuk. This was followed by a €1bn (US$1.12bn) green sukuk by Saudi-based Islamic Development Bank to finance renewable energy, green transportation and pollution control in its member countries."

Ms. Noronha explains that "[c]ompared to conventional sukuk, the market for green sukuk is tiny. Conventional sukuk issuance totaled US$162bn in 2019, while the total outstanding debt for green sukuk amounts to only US$7.9bn..." She adds that "some view it as a natural solution for low-carbon investment. Islamic finance is based on assumptions of fairness and social responsibility, and—while it has not always been observed—environmental stewardship is intrinsic to sharia principles."

What is more, "Since sharia forbids the receipt of interest, sukuk are backed by assets and investors are paid an agreed share of the profits before being returned the principal at maturity. This structure gives them confidence that their capital is being used for a particular purpose."

As a way to combat the effects of climate change, I am witnessing a rise of business and investment opportunities in Africa, Asia, and the Middle East in the automotive (electric vehicles) and renewable energy (wind, solar, and biogas) sectors. Recognizing an increasing interest among investors to support environmental, social and governance initiatives (ESG), I concur that "[t]he combination of investors seeking sharia-compliant investments and those with ... ESG priorities provides a wide investor base for green sukuk."

What instruments are you seeing used to support sustainable investments?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.

GSMA: '5G Has Arrived – but 4G Is Still King'

According to a report authored by GSMA Intelligence, the research and consulting arm of the GSMA, a UK-based trade organization, "5G will drive future innovation and economic growth, delivering greater societal benefit than any previous mobile generation and allowing new digital services and business models to thrive."

The Mobile Economy 2020 further explains: "Many countries have already launched 5G, but widespread commercial 5G services are expected in the post-2020 period, which will mark the start of the 5G era. 5G is developing in parallel with rapid advancements in both AI [artificial intelligence] and IoT [Internet of Things]; the combination of these technologies will have a large positive impact, spawning innovations for consumers and enterprises defined by highly contextualized, on-demand and personalized experiences."

As highlighted in this press release, GSMA Intelligence's report reveals that:

"5G has arrived – but 4G is still king: 4G was the world's dominant mobile technology last year, supporting more than half (52 percent) of global connections. Despite the emergence of 5G, 4G will continue to grow over the coming years, increasing to account for 56 percent of connections by 2025.

"The industry is investing heavily in 5G: Mobile operators are expected to spend $1.1 trillion worldwide between 2020 and 2025 in mobile CAPEX, roughly 80 percent of which will be on 5G networks.

"The smartphone is becoming ubiquitous: Smartphones are forecast to account for four of every five connections by 2025, up from 65 percent in 2019.

"IoT will be an integral part of the 5G era: Between 2019 and 2025, the number of global IoT connections will more than double to almost 25 billion, while global IoT revenue will more than triple to $1.1 trillion.

"Subscriber growth is slowing, but the industry still has people to connect: The number of unique mobile subscribers at the end of last year stood at 5.2 billion (67 percent of the population) and is forecast to grow to 5.8 billion by 2025 (70 percent).

"Half the planet connected to the mobile internet: Almost half of the global population (3.8 billion people) are now mobile internet users, forecast to reach 61 percent (5 billion) by 2025."

Regarding connected devices, "The business case for IoT is shifting from just connecting devices to addressing specific problems or needs with solutions to collect, process and integrate data from multiple sources, which can then be analyzed to create value and provide actionable insight." Furthermore, "Enterprise IoT connections will overtake consumer in 2024, and will almost triple between 2019 and 2025 to reach 13.3 billion. This will account for just over half of all IoT connections in 2025.

"Consumer IoT connections will almost double to 11.4 billion in the same time frame. More and more devices include connectivity built in by default and interoperability within the ecosystem is increasing."

The report also explains that smart manufacturing and autonomous cars are important verticals for 5G and presents the following use cases for the former:

Robots and robotics

• 5G increasingly complements Wi‑Fi in factories
• Real-time AI-powered robot collaboration and integration
• Cloud-based wireless robotics

Labor augmentation

• 5G and AI-powered industrial AR, enabling workforce training and augmenting human skills
• High precision simulations of human-machine interactions in various manufacturing situations

Remote real-time manufacturing

• Live remote monitoring and reconfiguration of robots and processes
• Remote quality inspection

Connected operational intelligence and analytics

• 5G coupled with AI enables real‑time data gathering to inform immediate manufacturing decisions
• AI-based analytics for processes, inefficiencies and predictive maintenance for robots

On the topic of mobile delivering social impact, the report says: "With more than 5 billion unique subscribers worldwide, and more than 7 billion people covered by a mobile network, mobile is increasingly being used to access an array of life-enhancing services that contribute to and catalyze the achievement of the UN SDGs."

"Despite the global reach of mobile," however, "much more can be done to leverage its power and support the delivery of the SDG 2030 targets. Crucial to this will be helping people realize the full benefits of using mobile and mobile internet services in terms of accessing health information, public services and digital payments, both in developed and developing countries. New technologies that are supported by IoT also need to achieve scale if mobile operators are to maximize their impact on the SDGs – for example, solutions in smart cities that can reduce pollution, and smart buildings and homes that can increase energy efficiency."

Infographic: GSMA Intelligence

While 4G remains the world's dominant mobile technology, "5G is gaining pace." Companies of all sizes are increasing their research and development budgets to build products and services to utilize the fifth generation wireless technology that is expected to deliver speeds 100x faster than 4G. However, for these investments to produce positive results, the report correctly notes that "Governments and regulators must play their part to help propel 5G into commercial use by implementing policies that encourage advanced technologies (e.g. AI and IoT) to be applied across all economic sectors."

What do you think of the report's 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.

2020 Will See a Pick-Up in Global GDP Growth and Global Trade, Despite Continuing Trade Tensions

"After a gloomy year, the world's major industries are looking for an upturn in 2020. However, much will depend on policies in the US," says a report by The Economist Intelligence Unit (The EIU), the research arm of The Economist, in its Industries in 2020 report.

In its Industries in 2019 report, The EIU "highlighted five major risks that could undermine global business during the coming year. Four of those risks came true: the deepening of the US-China trade war, an emerging market downturn, tussles over technology and sanctions on Iran. These all dented economic growth and consumer confidence, dragging down sales across several business sectors during 2019. The fifth risk we mentioned, Brexit, has still not happened, but continues to overshadow business in Europe."

The EIU is "expecting a pick-up in global GDP growth and global trade in 2020, despite continuing trade tensions. However, regional trends will diverge, leading to mixed growth forecasts for the six major business sectors covered in this report: automotive, consumer goods and retailing, energy, financial services, healthcare, and telecoms. While there will be opportunities on offer, there are six factors that will determine the direction of these industries in the coming year:

• "A sporadic recovery. Although the global economy will accelerate, growth will be led by an upturn in non-OECD markets, while OECD markets will remain subdued. However, GDP growth in China will also continue to slow, affecting global demand for many goods and exposing problems with manufacturing overcapacity.
• "A watershed election. The US presidential election in November 2020 will be a turning point for several sectors. The re-election of the Republican president, Donald Trump, would slow the rollout of renewable energy, for example, while a Democrat victory could bring new efforts to reform healthcare, as well as sharp increases in corporate taxes.
• "From trade to regulation. The US-China trade war will broaden to affect markets including the EU and Japan. However, the focus will turn from tariffs to regulation, particularly that of the financial and technology sectors. We expect more US sanctions against Chinese companies, as well as legal skirmishes over intellectual property.
• "Asian alliances. While the US continues to raise trade barriers, Asia is forging ahead with new trade deals. The 16 countries in the proposed Regional Comprehensive Economic Partnership (RCEP) aim to sign an agreement in 2020, creating the world’s biggest free-trade agreement. Meanwhile the 11 countries in the overlapping Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will continue to ratify that deal, while opening negotiations with potential new joiners such as China.
• "Brexit hangover. Even if Brexit happens on January 31st 2020—as currently expected—uncertainty will not disappear. The transition period could be fraught, with short-term disruption to trade flows heightening political wrangling over future trade deals.

What is more, "These factors will affect all six of the industries covered in this report, to varying degrees.

"The automotive sector, which has tumbled in 2019, will benefit somewhat from the recovery in many emerging and developing markets. We see car sales heading into positive territory after dropping in 2019. However, commercial vehicle sales in particular will come under pressure from global trade trends as the US continues to threaten vehicle-producing countries such as Mexico, Germany, Japan, South Korea and China with increased tariffs. Brexit will also bring enormous challenges for Europe's vehicle sector, particularly for UK-based producers.

"Consumer markets will also be badly affected by global trade tensions, particularly in the electronics sector, while the political turmoil in Hong Kong will dent sales of luxury goods. This, combined with retail’s greater reliance on developed markets and the rise of online retailing, will slow global retail sales. We expect retail sales to rise by just 2.2% in volume terms, down from 2.5% in 2019.

"For the energy sector, the pledges made under Paris Climate Change Agreement in 2016 will begin to take effect in 2020, making this the base year against which 2030 targets will be judged. However, with the US on the brink of withdrawing from the agreement, global progress will be slowed. The target of slowing global warming to less than 2 degrees centigrade is looking increasingly unattainable, unless the US election results in an unexpected policy change. The oil sector will also be vulnerable to political shocks, although we expect slow consumption growth to keep prices range-bound.

"The financial services sector will see little uplift from accelerating global growth, because it will be more affected by the slowdown in core OECD markets. The economic weakness of developed markets will keep interest rates low, maintaining the pressure on banking and investment margins. Several major financial hubs, including Hong Kong and London, will also be fragile amid difficult political conditions. However, the expansion of digital banking will hold immense promise for increasing financial inclusion in emerging markets.

"For the healthcare sector, too, the US presidential elections will be a particular watershed. Debates will rage over healthcare reform and drug pricing. With other countries also bearing down on prices but expanding access to healthcare, we expect global health spending to accelerate sharply, while spending on pharmaceuticals slows.

"In the telecoms sector, investment in 5G and fiber fixed-line services is likely to be a top priority in 2020. However, companies will have to invest with little certainty of a return and with regulation still uncertain. Moreover, the US-China trade war will continue to pose a major risk, given the dominance of Chinese companies such as Huawei in the build-out of telecoms infrastructure."

The report adds: "As a result of these trends, our key global forecasts for the six industries covered by this report are:

• new-car sales will recover to grow by 1.7%, but CV sales will edge down by 0.1%;
• retail sale volumes will increase by 2.2%, slower than the 2.5% reported in 2019;
• global energy consumption will rise by 1.8%, with particularly strong growth for renewables, while oil prices will remain range-bound;
• bank balance sheets and lending will expand by 6.5%, with Asia leading the expansion;
• healthcare spending will climb by 6.2% worldwide in US dollar terms, despite growth of just 3.1% for pharmaceuticals; and
• global mobile subscriptions will increase by 3%, fixed lines by nearly 2% and broadband subscriptions by 6%.

"Despite these mixed forecasts, there will be opportunities on offer for companies that are competitive and international enough to take advantage. Even so, they will have to be nimble to adapt to rapid changes in the business and political environment."

Lastly, The Economist produced a video presenting its predictions for the top stories of 2020.

What are your predictions for 2020?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.

Political Risk Will Hang Heavily Over Corporate Investment Decisions in 2018

Each year The Economist Intelligence Unit (The EIU) issues a report forecasting how six industry sectors (automotive, consumer goods and retail, energy, financial services, healthcare, and telecoms) will develop globally over the coming year. Industries in 2018 highlights how traditional business models are likely to come under strain amid sweeping changes, many driven by technology. It also highlights how, despite continued global economic growth, companies will need to remain flexible and be wary of political risks, particularly in the European Union (EU).

The EIU report begins by asserting: "Traditional business models will come under strain amid sweeping changes, many driven by technology. Despite the decent economic conditions, political risk will hang heavily over investment decisions."

Furthermore, "This year's report, which gives our forecasts for 2018, highlights how old ways of making money are fast going out of fashion. Perhaps the starkest example of this is in retailing, where online selling is dramatically disrupting the traditional shopping culture. That industry is not alone. Telecoms companies are facing new challenges from technology players, heightening already fierce competition, while established players in carmaking and energy are struggling to adapt to the rise of clean technologies. Pharmaceutical companies face pricing and patenting dilemmas, while regulators are redoubling pressure on financial services companies."

From a business strategist perspective, I support the report's assertion that "companies will need to shake up their business models in 2018 to respond to these pressures. However, planning is easier than execution. New regulations, new competitors and new consumer demands will emerge during the year ahead in many markets, while the business environment will develop in ways that may be hard to predict."

What is more, according to The EIU, "High levels of political risk will also complicate matters in each of our six industries: automotive; consumer goods and retail; energy; financial services; healthcare; and telecoms. At least global economic conditions will not be bad—although not quite as good as in 2017."

Lastly, the report importantly notes:

Although White House policies continue to concern many companies in our six industries, the threat of a damaging trade war has receded since our 2017 report as geopolitical and business realities win out. Even so, global trade growth will decline from 4.6% in 2017 to 3.5% in 2018, mainly owing to a slowdown in China's economy. Political risks will remain strong, particularly in the EU: as Brexit edges nearer, the risk that the negotiations will break down remains high. In 2018 companies will need to remain flexible enough to deal with such risks, while also seizing the opportunities presented by continued global growth.

Do you agree that political risk will hang heavily over corporate investment decisions in 2018?

Aaron Rose is an advisor to talented entrepreneurs and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.