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Top logistics executives are pessimistic about the outlook this year, with nearly 70% of them saying they are bracing for an economic recession, as higher costs, slowing demand and supply chain disruptions continue to impact their business, according to a survey.
The global study conducted among 750 professionals by Kuwait’s Agility showed that nearly half (45.1%) and 23.3% of the respondents feel that a recession is “likely” or “certain” to happen this year.
The company, which is one of the largest logistics companies in the world, released the results of its survey on Tuesday to provide more insights into the sector. It said the industry continues to deal with uncertainty even as COVID-19 restrictions have eased.
Operators in the industry, including carriers and shippers of consumer goods and cargoes, have recently been feeling the impact of inflation caused by Russia’s war in Ukraine. The conflict has resulted in higher input costs for businesses and lower revenues.
“Carriers and shippers are feeling the effects of higher energy prices, tight labour markets and broader inflation,” said Tarek Sultan, Agility Vice Chairman.
“Three years after the start of the pandemic, there is still a lot of volatility in supply chains. Now there’s uncertainty as consumers and businesses pull back on spending and hiring.”
War in Ukraine
In Agility’s survey, the majority of executives (96.3%) said their business has been impacted by the war in Ukraine. Nearly a third (28.6%) said the logistics costs have increased, while another 29.8% said that business costs, including raw materials and energy, have gone up.
Around 23% said they are still dealing with supply chain disruptions while 14.7% are seeing a decline in revenue.
When asked what they intend to do in the next 12 months to deal with “spiking” energy prices, 23.3% said they might increase prices, while 10.4% are looking to cut down on labour costs.
The rising commodity/raw materials costs, among other factors, have also prompted 20.5% of logistics executives to consider moving their production or sourcing out of China.
The executives noted that China’s share of global growth has declined, while doing business there has become more difficult.
Others also said they have plans to move out of China due to increasing regulation in the country, rising labour costs and strict anti-COVID policies.
The International Monetary Fund (IMF) said that global economic growth is expected to fall from an estimated 3.4% in 2022 to 2.9% in 2023, before rising to 3.1% in 2024.
In the Middle East and North Africa (MENA), growth will slow to 3.2% from 5.4% in 2022.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
