East to power global economy in 2019

OTCINACTION

According to the latest research from the Economist Intelligence Unit (EIU), several countries in Asia-Pacific, the Middle East and Africa will produce the highest economic growth in 2019, while North America, Europe and even Latin America will lag behind. There are some exceptions to this trend (like Poland and Ireland in Europe, which are forecast to outperform the global economy in 2019) but the general picture shows that the highest GDP growth will be in the east.

Although there are concerns about the economic slowdown in China – see our blog just before Christmas and the recent letter from Apple CEO Tim Cook to investors – the country is expected to remain among the best-performing economies in 2019, with a growth forecast of 6.3%. The EIU revised up slightly its China forecast for 2019, following the agreement reached between the US and China at the G20 to delay planned tariff actions. However, it remains uncertain whether a bilateral trade deal will be reached.

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China’s troubles may actually be providing a boost to neighbouring Asia-Pacific markets, such as Vietnam, which offer an alternative manufacturing location. Also, as we’ve highlighted on the blog previously, several African markets have likewise been boosted by their growing status as manufacturing hubs, notably Kenya. As for India, it is forecast by the EIU to be among the Top 5 fastest-growing economies in 2019, continuing its strong 2018 upturn – according to the latest OTC DASHBOARD data for the MAT Q3 2018 period, India is the fastest-growing OTC market in Asia-Pacific, up 8.8%.

At the other end of the scale, key Latin American markets Venezuela and Argentina are forecast to be among the Top 5 worst-performing economies in 2019, while Mexico and Brazil are also expected to perform below par this year. However, high inflation has helped to boost OTC growth in these markets. As for Europe, several western European markets are forecast to produce low growth, while Japan, Turkey and South Africa are all expected to produce growth in the 0-2% range, with the US performing slightly better.

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Uncertain economic outlook in 2019

OTCINACTION

As well as the ongoing uncertainty over Brexit, another cloud on the economic horizon for 2019 is the health of the US retail sector. According to a report over the weekend by the FT, shares in US retailers are set for their biggest quarterly sell-off since the financial crisis. This follows weak economic data in Asia-Pacific, especially China where retail sales hit a 15-year low in November 2018, and Europe, prompting concerns about a global economic slowdown.

Tariffs, and the threat of tariffs, have been one factor. Some US retailers are reportedly now having to offload surplus stock at a heavy discount, after accelerating imports in recent months to avoid planned higher tariffs (which are now on hold), while the fall in industrial output in China is partly linked to US tariffs that have been imposed. Also, concerns have resurfaced among investors about the ability of bricks & mortar retailers to navigate the e-commerce revolution. As a result, shares in various US retailers have fallen sharply, from high-end to mass market chains, like Target (down 23%).

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Amazon shares have also declined this quarter, though the e-commerce giant still looks on course to disrupt pharmaceutical distribution and reimbursement in 2019, a fact that hasn’t eluded many top pharma executives. J&J CEO, Alex Gorsky, in an interview with Fortune, said: “We have conversations at all levels going on with Amazon. I think Jeff (Bezos) and as importantly Amazon is a very innovative organisation, and they see this as an opportunity to make a difference. Just as we are partnering with them today in areas of our consumer products, we’ll look forward to partnering with them in the future in some of these other areas as well.”

Pfizer Chairman & CEO Ian Read also said late last year: “Any system of distribution that can cut costs and get a wide availability of products to patients is something that the whole industry would be interested in.” This disruption to pharma distribution, allied with the current economic uncertainty, looks set to make for a volatile year in 2019. According to Nicholas Hall, the “Big Beasts of Big Pharma are right. Amazon and Alibaba are today the most powerful disruptors of the healthcare industry. Some brand marketers will embrace this change, most will not … until it’s too late.” 

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