Export, we start again in the autumn. So we will sell food and drugs to China and Germany

Export, we start again in the autumn. So we will sell food and drugs to China and Germany
Illustration by Guido Rosa

Export is a key to understanding the health of companies, therefore of the country. The recovery of exports, for Italian companies, may start in the fourth quarter of this year. Not for all sectors, of course: more for agri-food and pharmaceuticals. And to countries like China, Vietnam or the Philippines, but also Germany despite some uncertainties. Other sectors such as transport and the automotive sector will have to wait until 2021, as will exports to the USA which, however, are expected to start again. All this while international trade is expected to drop 6.4% this year by volume due to the “great lockdown”, the great global blockade of activities following Covid-19. The good news is that a significant recovery is expected already next year: + 7.9%.

The recovery in sight

Alessandro Terzulli
Alessandro Terzulli

These are the forecasts, based on Oxford Economics data, reported by the Sace research office led by Alessandro Terzulli, chief economist of the company which is participated by Cassa Depositi e Prestiti and since last month with the Liquidity Decree it entered the direct management orbit of the treasury ministry (which in turn controls CDP). «In 2021 there may be a strong recovery, but it won’t be by magic – says Terzulli -. Italian companies are prepared and are busy, but investments, marketing strategies, proximity to customers will be needed. ” The estimates – pending the Sace 2020 report on exports, scheduled for the end of June – consider a base scenario, not the worst therefore, and generally include the monetary and fiscal support instruments of the European Union and national.

The outlet countries

Italian exports are currently forecast by Sace to decline, after a decade of expansion, with an indicative gap of -5 / -10% in 2020, depending on the sector; but the trend could already overturn next year with a + 5 / + 10% possible, with the recovery of demand.

The pandemic

“It is clear that the impact of this pandemic will be heavy on international trade – says Terzulli, professor in Cattolica in Milan, former economist in Confindustria -. Demand will drop a lot as trade in goods will drop worldwide. Not only does the pandemic weigh but also, for the first part of the year, uncertainty about China, whose GDP is expected to drop slightly to -0.2% at the end of the year, supported by the partial easing of measures to contain the coronavirus ». In Brazil, Russia and South Africa, the contraction of GDP will be “more severe”, Terzulli notes, and Africa will be the market most at risk for those who export, due to the foreseeable difficulty in containing the pandemic, if the virus accelerates. In Europe, France and Great Britain “are not among the countries of first start”. Instead, outside the EU, the Emirates and Saudi Arabia are expected to open, despite the lower revenues from oil, and in Latin America “Peru, Colombia, in some ways Chile”, where Italy makes infrastructures.

The braking on duties

The slowdown in global trade growth had already started last year (+ 0.2% year-on-year for Oxford Economics), notes the Sace research office, for the battle between Washington and Beijing on tariffs. Now the pandemic freeze widens the wedge and, says Terzulli, “will affect more than goods, services” where the effect of the lockdown cannot be recovered after three months, think of transport or tourism. What has been lost has been lost. In general, “Italian companies will have to try to grow as demand falls back”. Oxford Economics expects -7.6% of GDP in 2020, recovering to + 3% in 2021.

The unknowns

The World Trade Organization and the International Monetary Fund estimate worse numbers on international trade, respectively at -12.9% and -11% this year (this figure relating to goods and services). “However, we expect a strong fourth quarter – says Terzulli – after a backward first quarter for China, a second for the pandemic and a third of transition”. Of course, cautions are a must. “But if the gradualness in the reopening works, it is reasonable to think that exports will resume”. In a worse, alternative scenario, “based on the plausible hypothesis of a prolongation of the pandemic”, the drop in international trade would be more marked: -13.1% (in line with the IMF and WTO). And GDP down 8.3% with slower recovery (+ 2.1% in 2021).

The sectors most affected

With bowls still, however, among the sectors most affected in 2020 Terzulli confirms first of all tourism, plus transport (including goods) and, in part, logistics. Among the assets “that will end the year in the negative” the economist then indicates “the automotive supply chain, for the coronavirus but also for short-term reasons”, such as uncertainty on diesel purchases and the drop on markets such as China . They will also need more time to share durable consumer goods such as “furniture, design” and non-durable goods such as “luxury with high fashion and jewelry that require trust”. While instrumental mechanics, which covers 20% of Italian exports (Italy is the fifth largest exporter of machinery in the world), “will suffer from lower investments”

Who is fine

The prospects for the agri-food sector are better, where “a lot will depend on the quality-price ratio” and, above all, the pharmaceutical sector, with Italy “where multinationals invest and there are skills”. Well medical equipment. “What is lost will be recovered – says Terzulli – but it is important that the recovery is this year, to reposition itself in 2021”.

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