A 15% depreciation of the Japanese Yen since November has revived fears of “currency wars” prompting the G20 to diffuse the situation. Meanwhile, the sterling lost around 6% of its value this year but this had more to do with the gradual unwinding of the safe haven effect and slower domestic growth than new policy initiatives.
The main threat these currency movements pose to UK businesses, is higher inflation. Fortunately, the cost base of most UK companies is under control as earnings growth continues to be subdued and substantial currency risk is hedged away. CEOs should, instead, focus on the export opportunities a cheaper sterling offers.
On a global level, business challenges remain. Our interview with PwC International’s Chairman, Dennis Nally, shows that CEOs around the world are less confident about revenue growth in the next 12 months than a year ago.
In response to this, businesses are reviewing and changing their operating model, making their products more customer-centric whilst carefully targeting their growth opportunities.
This month we have focused on the African continent, which shows that eight more economies are expected to join the “7% club” presenting businesses with immediate growth opportunities, particularly in the infrastructure sector.
But Africa is still a hard place to do business. Our heat map indicates that to unlock the growth potential and really start to compete with other developing and emerging economies, African authorities need to make it easier for businesses to operate there.