A.T. Kearney makes its 10 predictions for 2019

27 December 2018 Consulting.us

Management consultancy A.T. Kearney has released its annual year-ahead predictions from its Global Business Policy Council. The Council’s third annual set of geopolitical/business predictions include an intensified US-China trade war, a consolidated cryptocurrency market, and a shortage of sand.

For the third consecutive year, A.T. Kearney has made a year-end stab at 10 significant events or trends that it expects to gain momentum in the coming year. Broadly, the consulting firm expects trade tensions and geopolitical realignments to accelerate in 2019, while underreported resource challenges will rise in seriousness.

1) The US-China trade war will intensify

This year, President Trump slapped tariffs on $250 billion of Chinese imports – despite the widespread opposition of the business community – prompting China to retaliate with tariffs on $110 billion in US imports. The two superpowers are currently in the midst of a 90-day negotiation period ending in February that has put a temporary halt to further tariff rate escalation.

A.T. Kearney expects the ‘ceasefire’ won’t last, as China will still refuse to address complaints over its industrial policy, weak IP protections, and forced technology transfers. Trump is expected to raise tariff levels while potentially extending the tariffs to an addition $267 billion in Chinese goods. China will likely retaliate with a further increase in tariff rates.

2) Bitcoin will lead the consolidation and maturation of the cryptocurrency market

Cryptocurrencies saw a huge spike in value in 2017 – with Bitcoin soaring 1,375% that year. Meanwhile, Bitcoin’s share of the cryptocurrency market capitalization fell from over 90% to 33% as ‘altcoins’ like Ethereum rapidly proliferated. However, the bottom fell out of the over-heated cryptocurrency market this year, with the 10 largest currencies losing over 80% of their collective value from January to September – as the bubble burst amid numerous breaches and hacks, and spiking fees.Sino-Russian trade growthAs the market matures post-crash, A.T. Kearney expects Bitcoin to reclaim nearly two-thirds of the market as risk-averse investors shy away from altcoins to the ‘safer’ haven on the ten-year-old crypto coin. Meanwhile, various regulatory bodies will aim to rein in the cryptocurrency market to reduce its use in criminal activity while decreasing price volatility.

3) The global trash crisis will spur innovations in waste management

The World Bank projects global waste generation to grow 70% between 2016 and 2050. Food wastage represents the largest share, while ecommerce has greatly boosted packaging waste. In emerging markets, most trash is illegally dumped or burned, while landfills across the globe create significant greenhouse gas emissions. Recognition of the trash problem will spur on innovations in reduction, reuse, and recycling, according to the report.

Projects like Clean India Mission will see trash collection and disposal improve in emerging markets. In the developed world, AI and robot investments will lead to better detection and sorting of materials by type – reducing costs and waste. Meanwhile, disruptors will match disposers of waste with recyclers (e.g. Scrapo), while others will innovatively recycle waste into usable products (e.g. Ecovative). Improvements in materials science will potentially introduce new polymer that can be recycled indefinitely.

4) The global shipping industry will crash into new sulfur regulations

On January 1, 2020, the International Maritime Organization will impose a new ban on ships using fuel with a sulfur content over 0.5%. So far, only 3% of the global fleet has purchased scrubbers (which cost between $1 million - $10 million per ship) in advance of the climate change mitigation initiative.

The low preparation will lead to a disruptive 2019 for the shipping industry – which impacts 90% of global trade. Fuel scarcity in advance of the deadline will lead to an estimated $60 billion in additional fuel bills, with some large crude tankers seeing a 25% increase in costs. These costs will be passed onto consumers already hit by stagnating wages, while seaborne freight cost increases will raise the prices of most goods for companies and consumers.

5) The Xi-Putin relationship will be the world's most consequential ‘bromance’

Sino-Russian economic ties have grown steadily in recent years as China has increasingly bought more Russian oil and gas. Meanwhile, Xi Jinping and Vladimir Putin, hit by US protectionism and sanctions, respectively, have embraced each other based on their mutual interests in authoritarianism and counterbalancing US influence.Tumbling emerging market performance will fuel credit crisisThe consulting firm expects the two leaders’ relationship to deepen further in 2019, as Xi and Putin offer themselves as ‘credible’ alternative global leaders. The countries’ coordination with North Korea will strengthen, while collaboration in the Arctic will increase in order to develop new trade routes as the ice caps melt. Meanwhile, a natural gas pipeline from Siberia will further solidify energy relations. Both countries’ economic relationships with the West, however, will continue to be much more significant.

6) The global anxiety epidemic will lead to a proliferation of new products

The global prevalence of anxiety and depression has increased by 15% and 18% respectively since 2005, while a global Gallup survey has found world happiness is at its lowest level since 2006. The WHO projects that depression and anxiety will match cardiovascular diseases as the largest global health disorders by 2020. Currently, 300 million, or 5% of the world population, suffer from clinical depression or anxiety.

As such, A.T. Kearney expects a wave of consumer spending in the area, supporting a multibillion-dollar anxiety and depression market – from over-the-counter cannabidiol (CBD) pills to tech gadgets like headgear and electrotherapies. Young people and geriatrics, the groups most prone to anxiety and depression, will drive the market.

7) A sand shortage will grind the gears of the global construction industry

Two-thirds of construction material is concrete, and two-thirds of concrete is sand. The construction boom, especially in Asia, has exploded global sand prices – as China has used more sand between 2011 and 2013 than the US did in the whole 20th century. Meanwhile, in the US, concrete prices have risen 70% between 2004 and 2018 on the back of sand-intensive hydraulic fracking in oil fields. Rising sand demand has devastated the environment, as legal and illegal extraction have eroded and degraded water-based ecosystems around the world.

A.T. Kearney expects ballooning sand prices to strain construction industries in emerging and frontier markets; Vietnam, for example, has seen sand prices rise 200% in 2017 alone. Higher costs will lead to the slowing or cancelling of numerous projects. Meanwhile, crackdowns on the illegal sand trade will pressure the construction industry to demonstrate compliance, effecting further rises in legal sand prices and putting the brakes on the construction boom.

8) The looming emerging markets credit crisis will grow in both scale and scope

Many emerging markets have been hit by serious financial and economic stress due to foreign debt and currency depreciations – among them Argentina, Pakistan, Turkey, Zambia, and Venezuela. The credit crisis is expected to get worse in 2019, as China (which is owed 20% of African external government debt) will not have its debts due by the end of the year serviced, as its aims to insulate itself from the damage of US tariffs.Bitcoin on path to regaining dominanceMeanwhile, the US Federal Reserve will increase interest rates and the dollar will strengthen, increasing debt repayment costs. A recovery in commodity prices won’t save emerging economies, as many will see their currency continue to depreciate. A.T. Kearney projects that two more countries will ask for an IMF bailout in 2019, joining Pakistan.

9) Africa will be more connected than ever

African countries have been pushing for more continental economic integration, with relaxing visa policies and the signing of the Single African Air Transport Market (SAATM) by numerous states to provide lower airfare and more direct flights. In the meantime, the African Continental Free Trade Area (AfCFTA) has been signed by 49 states.

The report expects economic integration to accelerate next year, with the AfCFTA coming into force after the agreement surpasses the 22-country ratification minimum. Nigeria and South Africa are expected to ratify the deal in 2019. A.T. Kearney also expect digital connectivity to continue strengthening.

10) Real life "Iron Man" will materialize in the form of exoskeletons

Exoskeleton technology has developed rapidly in recent years and the report expects the technology to shed its sci-fi image and become popular across numerous industries in 2019. Ford has already deployed exoskeletons in 15 plants to improve worker safety and productivity, and more manufacturers will follow suit. AI will further address design challenges in weight and mobility. Meanwhile, a growing market for the exo suits will be supported by those with weak muscles and joints, as well as for physical rehab purposes. A.T. Kearney expects entrepreneurs and venture capitalists will acts as major catalysts for the tech’s growth.


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