2017: A year of uncertainty and turbulance

1 February 2017

It has probably never been as difficult to predict future economic developments as today. What is becoming clear is that the current economic and financial system may look totally differently at the end of this year – changed according to the rule: destruct and rebuild.

The globalisation tide is being quickly reversed in major economies, and replaced by more populist, protectionist policies, with high probability of global contagion. Some call these new policies “weapons of mass trade destruction”. I see 2017 as an extremely political and turbulent year – initiating a new era of post-truth and “alternative facts”. So the predictions below are highly uncertain, and I may have soon to come up either with “alternative projections” or create “alternative facts” to support our current projections.                                  





1. The world economy expands by 2,5-2,6%, same pace as 2016

The scary pattern of downward revisions in growth targets that we have seen since the Global Financial Crisis continues also in 2017. China slows down to 5-%, and the Eurozone slows down to 1,3-1,4% growth. On the somewhat positive side, the US economy grows at a pace slightly above its long-term average (2%) in 2017; India should improve and Brazil/Russia are expected to start their recovery.  



2. Commodity prices improve

A weak supply/demand balance of coal, iron ore, crude oil and other commodities, keeps the potential for growth in commodity prices down, and postpones growth in emerging markets such as: Latin America, Africa, and parts of Asia. As of 1 January 2017, OPEC’s supply agreement reduces the global supply of oil in the world in an attempt to raise oil prices. However, this will only provide a temporary support to oil prices, as the “America First” policy will trigger a new shale oil and gas boom.

3. Middle East’s economic growth remains restrained

Inability to lift oil prices, regional political instability, and war with the Islamic State, all restrain growth in the Middle East during 2017.


4. Interest rates increases continue and the US Dollar strengthens further

The US Federal Reserve increases their interest rate again in 2017, forcing other mature countries’ to follow. The increased interest rates will challenge debt-heavy emerging economies, many of which are already struggling from low commodity prices (reference 2). 


5. Factory new light vehicle demand expands by an insignificant 0,5%

The demand in the U.S. and Western Europe is expected to stay flat while Japan and South Korea remain depressed. In China, the Government continues to subsidise certain types of cars in order to support the market also in 2017. However, despite governmental stimulation, the automotive demand in the country is expected to slow down during 2017. In India, the demand will continue to feel the negative impact of demonetisation.

On the positive side, South Asian demand is expected to recover further during the year (apart from India), the ASEAN markets are projected to accelerate, Brazil and Russia to start their recovery and the Middle East and Africa to stabilise. 


6. High and Heavy markets finally show some signs of recovery

The recovery in the High and Heavy markets is mainly driven by improving commodity prices, hope for a stronger construction spending in the US and steady infrastructure investment in emerging economies, supported by China’s One Belt One Road global push. However, high debt levels combined with increasing interest rates (reference 4) in many countries, negatively affects public projects. In most countries there is a glut of used machinery yet to find work.


7. Breakbulk markets remain weak, but opportunities remain

Renewable energy and energy efficiency projects, urban mobility projects and projects related to the broadening of emerging economies continue..


8. World trade volumes continues to grow at subpar

The anti-globalisation forces are affecting negatively the volumes of cargo being transported between continents. For 2017, the negative effects of increasing protectionism start unfolding in the global trade environment. If the growth and embracing of protectionist policies throughout 2017 becomes a reality, it may pose a huge threat to the shipping industry and could disrupt trade flows and limit economic growth. Meanwhile, bilateral free trade deals flourish.


9. Global vessel overcapacity coupled with slowing trade still hampers shipping

Overcapacity is a challenge for many shipping sectors in 2017. In the container market scrapping of ships has been on the rise lately, but the expected deliveries of mega-boxships this year is likely to lead to even more capacity entering the shipping arena, overwhelming the market. Also the bulk shipping sector faces a desperate need for increased recycling and in the tanker market - there is no sustainable recovery on the horizon. The PCTC industry is however rebalancing as owners are removing an increasing number of old, inefficient vessels from the world fleet and cascade the smaller deepsea tonnage to regional trades.


10. The risks surrounding the global economy increases

2017 will be a year of uncertainty and risk in the global economy. The US is implementing significant changes in their economic and trade policies, China sees their debt rising while capacity is at excess. At the same time, the Middle East and Africa experience challenging conflicts, and in the Eurozone there is renewed danger of multiple crises. All in all, an extremely high global debt burden leads us to a limited investment potential across all continents.



Teresa Lehovd is the Head of Market Intelligence at Höegh Autoliners. She holds over 30 years of experience in the RoRo shipping industry, whereof 20 years in various market research positions where she is specialised in the research of global automotive and heavy equipment industries. Teresa is also a guest lecturer at the Norwegian School of Management in the area of Competitive Intelligence and Shipping, and frequent speaker at various industry conferences.


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