2016

A global survey by Grant Thornton of 2,500 businesses in 36 economies reveals a marked split in the export expectations of businesses across the Asia Pacific region.

While the region as a whole is expecting an increase in export activity over the next 12 months, mirroring the global outlook, a handful of Asia Pacific economies, including New Zealand, actually report radically reduced expectations as concerns over currency volatility and world trade take hold.

The Grant Thornton International Business Report (IBR) reveals that in Q2 2016, 15% of businesses across the Asia Pacific region expect exports to increase over the coming year, up from 8% in Q1. However, this masks sharp falls in a pocket of businesses across four major economies. The business outlook for exports in New Zealand has fallen from 40% in Q1 to 22% in Q2, while in Australia it has fallen from 39% to 28%; Singapore is down 12% to
-6%, and in Malaysia the outlook has plummeted from 36% to 6%.

Paul Kane, Partner, Privately Held Business at Grant Thornton New Zealand commented: “As the world becomes more interconnected, exports are an increasingly important source of growth for large parts of the Asia Pacific business community. That’s why it is good to see that despite a global backdrop of economic, social and political uncertainty, for large parts of the community plans to export more are increasing. But that isn’t the whole picture.

“Reduced commodity demand in China has weakened export prospects and lowered commodity prices, which creates depreciation for commodity exporting economies such as Malaysia and Australia. We are no doubt feeling the pinch in New Zealand as our currency appreciates against the Australian dollar, and Singapore’s status as a trade hub could be feeling the effects of global uncertainty slowing some trade flows.

“The reasons for the slump in export plans in these countries differ, but the steps businesses can take to remedy them are consistent. By planning for long term scenarios and prioritising a diversity of revenue streams, firms will be in a better position to prosper even if the challenged on some parts of their business intensify.”

The IBR reveals that Australia, where the currency has weakened, has seen an increase in firms citing exchange rate fluctuations as a constraint on their ability to grow (up 4% to 16% in Q2). Similar increases are reported in New Zealand (up 8% to 20%) and Malaysia (up 2% to 64%).

Overall business optimism increased across Asia Pacific in Q2 from 21% to 28%; however, this was measured before the UK voted to leave the European Union.

Kane added: “Although the UK’s decision to leave the European Union may not directly impact many businesses across Asia Pacific, it could do so indirectly – for example, if markets continue to be volatile as a result of the decision. Not enough is yet known to inform many of the biggest decisions facing businesses with European operations.

“When thinking about the threats and opportunities a Brexit could create, and planning how to create and protect value, it may be worth considering any short, medium and long term implications for issues like people and talent, exports and imports, strategic ambitions, financing, risk, operations and protecting investment. This will also help guard against unexpected shocks which could derail long-term growth prospects.”

Further enquiries, please contact:

Paul Kane
Partner, Privately Held Business
Grant Thornton New Zealand
T +64 (0)9 308 2576
E paul.kane@nz.gt.com