Strategic Treasury

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Transforming Global Trends into Competitive Opportunities Exactly how can your company leverage the major trends of today, and what challenges do these trends create for multinational corporates? Michael Guralnick has the answers.

Transforming Global Trends into Competitive Opportunities

What are the major trends you see today and how are you helping clients leverage these trends?

The global economy has been experiencing extraordinary economic challenges, with average GDP growth of advanced industrial countries expected to remain sluggish (at below 2%) for the next two years. The Emerging Market (EM) countries, however, are expected to remain the world’s engine for growth, even though their prospects have also been trimmed by 0.3 - 0.4 percentage points for the same period, reflecting their trade linkages with the advanced industrial countries as well as the impact of policy tightening measures to contain developing and actual inflationary pressures. Growth prospects will likely continue to be weighed down by investors’ pullback from risk, in the face of dramatically changing uncertainties associated with sovereign debt and fiscal excesses in the Eurozone as well as the United States.

Notwithstanding these macroeconomic challenges, there are three overriding trends which introduce new challenges but also represent opportunities for growth. They are: 1) Globalisation, 2) Urbanisation, and 3) Digitisation. Citi, with its long-standing reputation for innovation and focus on globality, partners with its clients in all regions to leverage its local, regional and global client and market knowledge to create solutions to leverage these important trends. Let me expand on each of these important mega trends:

Globalisation has led to acceleration and shifts in trade flows particularly from / to the EM. Since 1990, we have seen a shift in the percentage of world real GDP from the Developed Markets (DM) to the EM. As cited in our publication, Global Growth Generators (February 2011), the EM as a percentage of world real GDP has grown from 42% in 1990 to 52% in 2010 and is forecasted to grow to 70% by 2030.

Globalisation has also been characterised by recent rapid international expansion by EM headquartered clients as they seek to enter new markets through acquisitions as a means to accessing new client bases, (e.g., there has been a significant increase in mergers and acquisition [M&A] activity from Asia into Central, Eastern Europe, Middle East and Africa, over $70bn, and over $37bn dollars into Latin America. Source: Dealogic Analytics for CIRA). In Global Transaction Services (GTS) we work with our clients to deliver our globally connected network, and transaction services platform, to provide our clients the ability to gain real-time control over liquidity management and their bank account activity as they pursue global growth strategies.

Urbanisation, in particular rapid population migration to urban centres, will require significant infrastructure investment. In the EM, explosive economic growth resulting from new sources of economic productivity will see the creation of a new affluent middle class which has significant implications for population growth and spending. To illustrate this shift, as of 2011, more than half of the world’s population now live in cities (17 of the world’s 20 largest cities are in the EM). The Emerging Markets represent 87% of the world’s population with an increasing work age population.

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