The year 2019 has started, and nobody exactly knows how the economy will develop over the coming 12 months. However, there are 5 trends already visible. They will have an impact on every business, no matter if you are self-employed or working for a large company.
Even if you don’t think, these trends will have an immediate impact on your business, it makes sense to anticipate them when reviewing your business strategy for 2019.
1. Economic growth slows down
According to the latest OECD forecast, economic growth in the world’s major economies will slow down. Global GDP is expected to expand by 3.5% in 2019 compared to 3.7% in 2018.
Depending on region and country, economic growth may be much different. While a few emerging economies may continue to have above-average growth rates, developed countries will face much lower growth rates. The slowdown of economic growth could be more pronounced, if some of the already visible visible risks materialise, including global trade conflicts and the weakening of the EU.
2. Global trade conflicts
In 2018, trade conflicts broke out between the United States and Europe and between the US and China. It remains to be seen, if these trade conflicts will be settled in 2019. I have serious doubts this will happen. Especially in regard to the case of the US-China trade relations, I expect the conflict to continue, as it is part of a political power struggle.
3. Weakening of the European Union
By the end of March 2019, the United Kingdom will leave the European Union, if there is no last-minute decision for another referendum on EU membership. The UK has been one of the economic heavyweights in the EU-28. The remaining EU of 27 members will be politically and economically weaker without the UK. How much weaker depends on whether there will be a chaotic Brexit without agreement or an orderly Brexit with agreement. Every company doing business in the UK and with partners from the UK will feel the effects, not to speak of the UK companies themselves.
According to the OECD forecast, the EU’s economy will grow by 1.9% in 2019. However, in view of Brexit and lack of cohesiveness between the remaining 27 members in regard to economic and fiscal policies, this forecast may turn out to be slightly too optimistic. Especially the development of reforms in France and fiscal policy in Italy are critical factors for the EU’s growth expectations.
4. Energy demand and CO2 emissions continue to rise
According to the latest report of the International Energy Agency (IEA), global energy demand is still on the rise.
As the shift to renewable energy sources remains slow, more fossil fuels are expected to be burned in 2019 than ever. This will lead to a further rise in CO2 emissions and more global warming. Sooner or later the cost for CO2 emissions will rise dramatically, which is expected to have a direct impact on energy-intensive businesses and indirect impacts on all other businesses in the mid-term.
5. Digital transformation
The effective adoption and use of innovative digital technologies is a key factor for the competitiveness of companies and countries. If your company does not have a digital transformation strategy yet, you better start developing one.
Among the many technological trends, the most pervasive is probably the use of Artificial intelligence (AI) in a growing number of business areas, from production to services. Predictions about massive job losses caused by the replacement of humans with artificially intelligent machines are exaggerated. However, AI will continue to drive a shift of human labour from repetitive, formalised tasks in production and service to more complex and more high-touch tasks.
A central factor for many new business models is the availability of a high-speed mobile communication infrastructure. The emerging 5th generation of mobile communication technologies, 5G, is promising to deliver this infrastructure and provide an innovation push for digital businesses. Roll-out of 5G in a number of countries is expected to start in 2019. However, it will at least take until 2020, until businesses outside of the communications technology will feel the benefits of 5G. Nevertheless, it is now important for many businesses to understand the opportunities, which 5G offers for their digital business models.
The year 2019 offers many known and unknown challenges and opportunities. The better you understand the already visible economic trends and prepare for the unexpected events, the more competitive and successful your business will be in the new year.
If you have not had a strategy meeting in the past few weeks for reviewing the business challenges and opportunities for 2019 and beyond, I recommend you have one before the end of January. Feel free to contact me for free advice on how to organise such a strategy meeting.