by Michael J. Shapiro | August 08, 2019

Trade risks are weighing heavily on the global economy and could significantly slow business-travel activity this year, according to a new forecast from the Global Business Travel Association. Economic uncertainty, particularly among the world's advanced economies, will likely slow global growth to 3.1 percent in 2019, according to the GBTA BTI Outlook Annual Global Report & Forecast. That would be the lowest increase seen by the industry since the depths of the Great Recession in 2009, when spending plummeted. The report, which was presented by Rockport Analytics at this week's GBTA Convention in Chicago, assesses the industry prospects through 2023.

The forecast for business travel is based largely on the global economic forecast as a whole, explained Jon Gray, principal with Rockport Analytics. The world economy is expected to slow this year and then rebound slightly in 2020, according to the International Monetary Fund. But the forecast for the world's advanced economies -- those that contribute to the  majority of global business travel spending -- does not call for such a rebound, and rather sees growth continuing to decline through 2020.

Economic and political uncertainty are "abnormally high," according the report, and are continuing to rise. Group business travel, the outlook notes, is typically most sensitive to such elevated levels. Concerns over trade, motivated in large part by the likely effects of the U.S.-China trade war, are causing business confidence to wane as well. "When business confidence declines," noted Gray, "business-travel activity tends to follow within one or two quarters."

In Europe, there is significant concern over whether the U.K. will leave the European Union without a trade deal in place. "A no-deal Brexit would be calamitous for business-travel activity in the short term," Gray added.

"I've just painted a pretty gloomy picture," Gray allowed following his presentation of the economic data. "It is gloomy. We do have a lot of challenges. But the fundamentals are still relatively strong," he added. "Consumption is good; retail sales are doing well; corporate earnings are doing well. Unemployment is at very low levels in the U.S. and Europe and other markets around the globe. The question is really about trade. The more we see trade barriers and protectionism, the more we worry about the effects and the possibility of pushing economies into recession."

Looking forward to a rebound

While the report calls for this year's business-travel spend to be the lowest in a decade, the numbers could start to bounce back in 2020. The outlook calls for 3.1 percent growth this year to be followed by a 4.1 percent increase in 2020, 4.8 percent in 2021 and then reach 6 percent in 2022 before slowing to 5.9 percent in 2023 -- at that point getting the business-travel market back on track to the growth it has seen for the past couple of years.

But a return to solid growth, underscored Gray, is contingent on trade deals being reached, particularly in sectors related to financial services, industry and consumer discretionary spending.

"Our baseline expectation is that we'll see slow, accelerating growth from next year through 2023," noted Gray. "But the downside risks are higher than they've been in previous years," he cautioned.