Socio economic macro scenario – A time of uncertainty

In our previous newsletter at the start of the year, we looked at how Brexit — at European level — and the arrival of the Trump administration — at world level — might influence trends and events in the political and economic scenario during 2017. Now, almost five months later, we can begin to make an assessment of the situation and look at possible developments in the immediate future.

In Europe, Brexit does not appear to have had the drastic effect on the political and economic balance of member countries that might have been feared, indeed on the contrary, observers have noted a moderately positive effect, tending to underscore community policy vis-a-vis the need to reach economic and business objectives based ultimately on greater unity and pragmatism. The financial markets and the main players in the world economy have demonstrated a preference for European togetherness over British isolationism, and this will probably translate over the medium term into a tendency not only for major multinational manufacturing groups to transfer production sites to locations in continental countries, but also for Europe's main financial trading activity to shift away from London, favouring Frankfurt, Paris and Milan. One possible outcome of such a development could be to strengthen the economic prospects of mainland European countries, while weakening those of the United Kingdom, in terms of domestic consumption and the ability to generate exports.

Globally, the first few months of the Trump presidency have been characterized by a contradictory political approach, and total unpredictability in policy-making generally. With its withdrawal from the Paris climate agreement, internal statements on welfare and immigration, isolationist policy and a lack of diplomatic circumspection at international level, the current US administration is perceived as a partner likely at very least to be unreliable, and this could be damaging in particular to businesses — indeed to the entire American economy, which at this time seems to be enjoying a period of noticeable exuberance following years of recession. This mismatch between the impetus for growth generated by businesses and by the American financial markets, and the political decisions taken by government, could create divergences and tensions domestically with unpredictable outcomes and extremely delicate implications internationally. In reality, the US approach on political and economic matters seen thus far is creating new opportunities for China, which continues to pursue an aggressive policy of economic expansion into western markets. As to China's economy, it is expected that this will be a year of healthy recovery and growth.

Moreover, trends in the political and economic scenario during 2017 are being influenced by a new and important factor to which attention must be given, not least and indeed most especially, regarding prospects in the Middle East for economic growth — in short, the equilibrium that will be restored — once the war on ISIS has "ended". With open conflict now between Saudi Arabia and Iran, there can be no secret as to the perilous tension in the Middle East, with repercussions of instability spreading from North Africa to Pakistan. Needless to say, this is an area compassing not only the largest known deposits of oil and natural gas, but also two critically essential trade routes, namely the Straits of Hormuz and Bab-el-Mandeb, the control of which carries planetary importance in strategic terms.

If the economy, trade and exports are to prosper, there is a need above all for conditions conducive to political stability and confidence in future prospects, but even from these few situations we have outlined, it would appear that such conditions are not reflected currently in the way events continue to unfold. Indeed plenty of economists are beginning to see the signs of a possible recession taking hold in the second half of 2018.

What are the prospects for Gen-Set industries?

As economic growth progresses and new standards of social life are established in all parts of the globe, there is now a constant demand for energy. Energy policies being adopted more and more by governments and transnational agencies tend to focus increasingly on self-generation, using both renewable energy resources, and generating sets made to measure for residential and industrial premises alike, with power units able to run on low environmental impact fuels. One strategic element to keep under observation is the manner in which electrochemical storage systems continue to evolve: in the light of progress made thus far, and of short-term development prospects, these will be adopted increasingly to provide a buffer between the primary source of production and end users, and must therefore influence the way in which generating sets themselves are built and specified.

In conclusion, it is safe to say that the message from the markets continues to suggest a positive trend in terms of demand, although these same markets are bound to be affected by the persistent state of geopolitical instability still pervading areas and countries of key importance to international trade. Against this backdrop, it is essential to keep up a highly diversified business approach in terms of clientèle and geolocation, and at the same time continue to invest in quality and innovation — in short, staying ready to respond to the new demands that are bound to accompany rapid technological progress. Another factor to take into account is that in practically all geographical areas, procurement budgets for the military and civil defence sectors are increasing steadily in size...