THE TICKER

BRACING FOR A DOWNTURN Iceland slipped into a recession earlier this year for a simple reason: Fewer people decided to travel to the island nation. It was People bathe in Iceland’s Blue tourism, after all, that had lifted Iceland’s Lagoon. economy out of the wreckage of its uniquely severe financial crisis earlier this decade—accounting for one-third of Iceland’s Bank Governor Mar Gudmundsson told economy by 2015. Bloomberg in June. “We have policy space … “We have Then the tourist boom, fueled by low to cut [interest] rates if necessary.” airfares, started busting. Growth in arriving The government can also throw money never been vacationers began to slow back in 2017 at the problem; it could roll out new as well and sharply decelerated last year. When stimulus spending instead of sustaining the prepared in budget airline Wow Air went bankrupt in budget surplus it expects this year. If this March, its collapse sent ripples throughout year’s recession proves mild and short, it our history Iceland’s economy—and the government could underscore the resiliency of Iceland’s to deal with sprang into action. The country’s central economy and bolster its leaders’ post- adverse bank cut its main interest rate while warning crash reputation as turnaround artists. Few of a contraction this year. Arion Bank now countries staged such a fast recovery from situations as predicts a downturn as deep as 1.9%. the 2008-2009 financial downturn. Having we are now.” Scary stuff—but compared to the been through the fire 10 years ago, many 10% decline in Iceland’s GDP between Icelanders seem confident that the current —Mar 2007 and 2010, not terrifying. Back downturn will be relatively mild. One Gudmundsson, Iceland Central then, the country’s three largest private potential indicator of this? Champagne sales Bank governor, to banks collapsed, sending Iceland into an at state-run liquor stores, which tend to rise Bloomberg economic depression. Iceland’s crisis was in times of prosperity, were on track to set an the largest in the world during this period, all-time annual record as of July. The current relative to the size of its economy. It took record is from 2007, just before the big crash. the International Monetary Fund and “Even though we are going through a Scandinavian neighbors to bail out the slump, we will regain our former strength,” country to the tune of $4.6 billion. Skapti Orn Olafsson of the Icelandic Travel This time, government officials say Industry Association told Bloomberg. “In 18 they are ready. “We have never been as to 24 months we will hopefully be back on well prepared in our history to deal with track.” At which point, there will be good adverse situations as we are now,” Central reason to pop the bubbly.

E-COMMERCE’S Between Amazon and according to Euromonitor Interna- will increase to 30% to 50% over Alibaba, it is easy to forget that tional. Between then and now, expect the next few years. NEXT GROWTH e-commerce is still coming of age. dramatic surges in online purchases “In the past couple of years, SPURTS Yes, business has been booming in places such as Vietnam and the marketplaces like Lazada, Rakuten, online for years in many developed United Arab Emirates. Flipkart and Shopee have made it countries, but e-commerce is still not Vietnam saw 20% growth in easy for Vietnamese merchants to the world’s biggest retail channel. its e-commerce numbers last year, sell online within the APAC region That will happen in 2021, when it will according to The Hanoi Times. and gave them the experience they account for 14% of total retail sales, Some experts predict that number needed to further expand around

6 INSIGNIAM QUARTERLY | Fall 2019 INSIGNIAM QUARTERLY COPYRIGHT © INSIGNIAM HOLDING LLC. ALL RIGHTS RESERVED. CONFIDENTIAL FALL 2019 AND PROPRIETARY. MAY NOT BE REPRODUCED IN ANY FORM, BY ELECTRONIC OR PRINT OR ANY OTHER MEANS, WITHOUT THE EXPRESS WRITTEN PERMISSION OF INSIGNIAM. VISIT WWW.INSIGNIAM.COM FOR CONTACTS. THE ‘MIRACLE ECONOMY’ COULD END SOON It has been called a “miracle economy” and But policy choices mattered too. Unlike the the “wonder Down Under.” No country U.S. and European governments, Australia in modern history has ever sustained an moved quickly to embrace a fiscal stimulus, economic expansion as long as Australia’s. boosting spending on infrastructure and low- The last time the country faced a recession income households. In addition, the country’s was in 1991—nearly 30 years ago. Since then, consistently high immigration rates have been its economy has managed to dodge the worst crucial to sustaining the economic boon—no effects of two major blows: the Asian financial other country even comes close to the nearly crisis of 1997 and the global recession roughly 45% population growth rate Australia has “Australia 10 years later. posted since 1991. That growth has boosted ISTOCK PHOTOS (2) How did Australia pull it off ? Chalk it demand for things such as housing, supporting found itself up to a mixture of happenstance and smart a massive building boom in cities this century. in the right policymaking. “Australia found itself in the Australia is “in the midst of an place at right place at the right time and embraced the unprecedented experiment in mass Asia century,” Tim Harcourt of the University immigration the likes of which the developed the right of New South Wales told the BBC. world has never seen,” Salvatore Babones of time and Australia opened up its economy in the 1990s, the Centre for Independent Studies in Sydney, embraced exporting commodities to Asian neighbors just Australia wrote in Foreign Policy last year. as they began revving their economic engines. Australia’s long run of success may be the Asia China’s rapid growth, in particular, has directly nearing its (inevitable) end, however. One century.” benefited Australia: Trade between the two possible scenario is that the escalating U.S.- —Tim Harcourt, countries grew tenfold in the 2000s. China tensions trigger a global recession University of New “Openness to trade and investment has that ensnares Australia. Another possible South Wales, to the been a huge part of our growth story,” Jarrod trigger? A housing market bust—the same BBC Ball, chief economist at the Committee for culprit that sent the U.S. economy into a Economic Development of Australia, told The tailspin back in 2008. Home prices have Atlantic. “As protectionism has made a bit of a fallen 15% on average since a five-year comeback, we have continued to promote and boom ended in 2017, as regulators tightened negotiate free-trade agreements.” mortgage standards. Consumer confidence Another lesson from Australia’s success fell to two-year lows in July. involves how best to fight off a recession. To be But do not bet on a recession. The sure, a booming mining sector helped cushion “miracle” economy has proved naysayers Australia from the 2008-2009 global recession. wrong before.

the world,” Miguel Warren, regional the United Arab Emirates—the top sales account for 35% of its total head of Southeast Asia at Payoneer market in the Middle East—online retail sales, whereas in the U.S., it’s Philippines, told Forbes. sales doubled between 2015 and only 10%.) Meanwhile, since 2014, the num- 2017, according to ResearchandMar- With the introduction of new tech- ber of online shoppers in Africa has kets.com. nologies such as 5G, which promises continued to grow about 18% every Meanwhile, China is on pace to to make the internet not only faster year, aided by an increase in internet replace the U.S. as the world’s largest but more accessible to rural and connections, smartphone sales and retail market—with online sales as the emerging economies, e-commerce’s a burgeoning middle class. And in primary driver. (China’s e-commerce dominance is all but in the bag.

quarterly.insigniam.com | INSIGNIAM QUARTERLY 7 INSIGNIAM QUARTERLY COPYRIGHT © INSIGNIAM HOLDING LLC. ALL RIGHTS RESERVED. CONFIDENTIAL FALL 2019 AND PROPRIETARY. MAY NOT BE REPRODUCED IN ANY FORM, BY ELECTRONIC OR PRINT OR ANY OTHER MEANS, WITHOUT THE EXPRESS WRITTEN PERMISSION OF INSIGNIAM. VISIT WWW.INSIGNIAM.COM FOR CONTACTS.