2021 — A year for Humanitarian Crisis and Healing
By: Raajiv Sami
Tags: Commodities, Innovation, Food Waste, Investment, Human Resources

Recap of 2020

After a challenging year that was 2020, most people around the world are looking towards the end of the year for a moment of resetting and starting afresh for 2021. There have been large scale challenges in 2020, with a raging pandemic, geopolitical tensions, trade wars, elections, and large-scale protesting. The purpose of this article is to highlight challenges for 2021, however this article is not written to make political statements and it should not be interpreted as something that is politically charged.

State of Play — sampling of economies around the world.

Azerbaijan — due to recent political tensions with its neighbours, the country now finds itself in a perilous situation with prudent economic management required. The Azerbaijani people were quite happy with what they believe is having won a war that has lasted decades and has cost lives but also livelihoods. Having taken control of Nagorno-Karabakh with the intervention of a brokered international deal, this could be a positive outcome. However, I believe the challenges are just beginning. With a large exposure to oil as exports and the price shocks experienced with oil in 2020, the country will experience an economic challenge that would challenge their government. The region of Nagorno-Karabakh will need significant economic stimulation, to not only build infrastructure, but also to improve economic indicators like jobs, business, healthcare, and education. On top of this, the government needs to invest heavily in defence to ensure that the peace treaty is respected. The declining oil prices and the government’s reluctance to utilise an open market exchange rate is quite interesting and very questionable as an economic policy. As regional neighbours Russia and Kazakhstan have had significant devaluation of their currency due to oil price shocks, this has ensured locally produced goods and services still were somewhat inflation proof. The challenges that lie ahead for Azerbaijan are enormous, as not only is the country experiencing case number increases for Covid-19, however the recovery rates are quite high, but the government is currently selling off their sovereign funds to ensure the Mannat (currency) hold its value. With previously basic imported goods now being a luxury item, the ongoing resiliency of the people will be tested. Core humanitarian supplies such as medical equipment, medicine and healthcare infrastructure is something that will experience inflation which will come as a detriment to the people. Imported foods will become luxury items. There is a high chance of increased unemployment in Gen Z’s and millennials, effectively making the country divided into the haves and have nots. The reaction to these problems and ongoing regional disputes will be problems that the government needs to monitor. There is a likely chance of a devaluation of the Mannat and Azerbaijani’s would be hoping for the continuation of the rallying oil prices to keep the optimism for 2021.

Nigeria — with the country now the largest economy in Africa, it is also experiencing significant damages to its economy. The 2nd wave of cases in Europe has not helped Nigeria as it has been losing oil demand from the Eurozone. Coupling this with the squeeze on the foreign exchange, this is an economic disaster waiting to happen. The forecast for Nigeria after the release of its 2021 budget, has average daily prices of oil at $40 and their exchange rate maintaining $379 to ensure growth of 3% for 2021 and a target inflation rate of 11.95%. Nigeria losing a lot of its primary market oil sales to the US in the Eurozone, this will be something of a challenge as Covid-19 cases take an uptick in numbers and need for foreign goods increases. Nigeria depends largely on foreign exchange from crude oil sales and as a result should brace for tougher times ahead. A protracted forex crisis will mean higher food prices, more borrowing to meet budget demands and difficulty in servicing the country’s debts. The economy needs serious considerations for diversification and the country is bracing for unemployment in the months ahead.

Russia — it is always interesting to discuss Russia as it is a country with a lot unknown. However, Russia also is in an interesting position. The country has had significant developments to its development of the Covid-19 vaccine, however based on the rising case numbers it does not seem the country can reach herd immunity anytime soon. On top of that, the rouble has had significant devaluation in the last 12 months due to oil price shocks and increased inflation rates to over 4%. The domestically produced food supply is well in demand and it seems the vast population is not able to afford imported food items. The Russian economy is expected to have declined by 6.6% in 2020 with expectations of a growth of 4% in 2021. This growth will be highly determined by oil prices; however, the economy is much more diversified these days with focus on innovation and technology, the country has high uptake of technology. However, food crisis could engulf the country if there are prolonged price shocks in commodities markets.

USA — the United States is an anomaly of an economy right now. With the stock market rallying significantly, the election results soon to be finalised, there is some peace being brought to the public sentiment. However, the US in currently the pinnacle for Covid-19 case numbers and mortality. Having recently lost a family member in the US due to medical complications (not related to Covid-19) there seems a divide in the availability of adequate medical care currently without universal healthcare. The country is projected to have significant mortality with Covid-19 till end of February and has fast-tracked a vaccine in response to the growing number of cases and mortality. In 2021, other parts of the healthcare system will be significantly tested, and this is a challenge for the US to balance out strong economic growth with emergency funding for healthcare. The public debt levels in the US now stands at US$27.5 Trillion, which is at record highs and this figure will only increase when the new government will take reign. With the US focussing on its internal problems, there is a vacuum in the global sphere, with poorer continents desperate to receive funding and humanitarian aid and other political forces currently coming to the fold with assistance. It will be a challenging year for the US, with the aftermath of Covid-19, large divisions in political preferences and choices, and growing National debt, economic policy aimed at targeting businesses may halt growth for the coming years, in response to curbing National debt. Stability will be key for the US after a challenging year, and whether that takes a couple of years, the country can build the resiliency and become the powerhouse the world knows it to be.

Australia — closer to home, Australia has done exceedingly well, in the face of adversity with several months in lockdown to curb the numbers of Covid-19. The strategy is paying off dividends as the economic recovery is going above numbers predicted and with the stimulus package provided by the federal government, people are spending to boost the economic recovery. Cities are vibrant again, with joys of the festive season. This is the Australia people know and love. The trade tensions with China are currently impacting future growth of the country. It will be interesting to see how the country is able to diversify its international relationships to ensure growth. Australia known as the lucky country, is again becoming lucky, with potential food shortages around the world, our agricultural produce will fetch higher prices. Australian food quality is known the world over, so there will be opportunities aplenty for the country to explore other markets. Trade tensions with China should also dominate 2021 economic outlook, however, with the government spending increasing and the trickle-down effect onto the consumers with increased spending, the economy has a positive outlook for 2021. With large amounts of vaccine bought by the government, the support of its people has been unprecedented and unseen in any other part of the world, again Australia the lucky country. However, the lucky country also has challenges that lie on its horizon. Although, Australian agriculture has a positive outlook due to commodity price increases, there needs to be review of workforce allocations, with previous backpackers now a distant memory, farmers across the country are looking for workers to pick fruits and vegetables to supply the domestic and international markets. The food inflation rates are soaring in Australia with seasonal and non-seasonal foods experiencing high prices. With the inadvertent stimulus package coming to an end in March 2021 (the jobkeeper and jobseeker policies) there must be targeted investments in innovation and manufacturing to curb the reliance on foreign trading partners. It can be foreshadowed that the government will continue its spending drive to solidify the economy and it has a good chance in achieving that, and this should be the current federal government’s legacy.

China — what an interesting year for China. With what was a disaster Q1, China’s recovery has been nothing short of amazing. The stimulation of the internal economy and the country opening to trade with diversified range of countries, seems the country has done well. With 2021 expecting to be a year of prosperity for China, with almost double-digit growth, it is potentially a year China becomes a dominant force internationally. However, the biggest challenges the country faces are the food supply and shortages. With the president, decreeing food wastage a target there is an emphasis on food supply. China currently doing deals internationally to secure food supplies, with an example of this, a deal being struck with Pakistan on grain supply and other countries for meat supply. There are also innovation hubs being created to explore food technological advancements to ensure the country has enough supply of food. With a lot of removal of red tape, it is potentially easier to conduct business in China, however due to political tensions with other countries, this will be one of the challenges for China in 2021, how to balance trade and the political rhetoric. The market currently with the largest liquidity, China is poised to make significant inroads in 2021. With health technology now also at the forefront, there are significant opportunities in China for start-ups and established brands alike.

Investment opportunities in 2021

The next year should see demand for food-based commodities rise significantly as the countries around the world look to resolve internal problems. Food based stocks should also experience growth because of earnings increases. Health technology should see significant investments made into the sector with each country’s exposure to Covid-19 now firmly ingrained in the government’s minds and how to combat future healthcare crisis will see advancements in Health Technology and healthcare stocks globally. There will be an appreciation of value with digital assets such as Bitcoin as investors around the emerging markets wish to combat inflation and devaluation of their national fiat currency with digital assets.

Concluding Statements

With 2021 on the horizon, there is a need for introspective look with what has been a challenging year for a lot of people around the world. World Food Bank has projected a significant number of mortalities on the aftermath of the pandemic and famine will be the challenges for 2021 as continents battle for food shortages. Unlike in previous years, a lot of the countries currently are also experiencing economic devastation internally in their own countries, so food wastage needs to be reviewed by all. Through economic cooperation we can build better futures, and this is a time to uphold our values as humans as we open a new year in a few weeks’ times respecting the challenges ahead.