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2020/03/03
Sluggish Economy Hits Asia's Flexible Packaging Demand
Sluggish Economy Hits Asia's Flexible Packaging Demand
Source from: https://www.flexpackmag.com/articles/90339-sluggish-economy-hits-asias-flexible-packaging-demand
Overall flexible packaging demand in Asia grew by 4.8% in 2019, down from 5.6% in 2018. This was mainly due to slower growth rates in major national markets, reports Wood Mackenzie.
According to Wood Mackenzie's report, ‘Flexible Packaging Asia Supply Demand Report’, the region's largest markets - China and India - experienced significant disruptions in 2019. Other neighbouring countries were impacted, which contributed to the overall decline in Asian growth rates.
"After more than two decades of rapid economic advancement in China, the past few years have seen GDP growth fall from over 10% in 2010 to 6.1% in 2019. This trend is reflected in flexible packaging, with double-digit sales growth at the beginning of the decade declining to 6.5% in 2019.
"In India, the economy has slowed significantly since 2018 because of the introduction of demonetisation and the Goods & Services Tax (GST) in 2016 and 2017 respectively. The subsequent sharp decline in consumer spending impacted demand for flexible packaging, with sales growth declining from 10% in 2018 to 7.4% in 2019.
"Although China and India have both had the largest impact on this slowdown, it's important to note that both continue to grow rapidly relative to other major national markets in Europe and the Americas," said Brendan Connell-French, Wood Mackenzie Analyst.
The Central Asia and East Asia sub-region accounts for roughly $26 billion and 63% of overall market share in Asia, while the South East Asia and Oceania region accounts for approximately $15 billion and 27% of overall market share in Asia.
According to Wood Mackenzie, while demand in China has slowed, the mature markets of Japan, South Korea and Taiwan have continued to grow at very modest historic rates.
While demand growth in India has slowed, most other emerging national markets in South East Asia have broadly maintained growth trajectories, although slightly lower than previously seen.
Sri Lanka is a notable exception, where flexible packaging sales declined by around 4% during the year after growing by 8% in 2018. "Sri Lanka's setback in 2019 was largely attributed to a terrorist attack in April of that year, which led to a fall in tourist activity and consequently lower consumer spending. The decline is seen as a temporary setback, with growth expected to recover by the end of 2024," added Connell-French.
Despite 2019's sluggish growth, Wood Mackenzie expects Asia's flexible packaging market to make up 50% of the global market within the next five years.
"The issue of plastic waste and sustainability will continue its momentum through 2020 and beyond. While flexible packaging usage in the region is still expected to grow significantly, local legislators will need to find the right way to balance this growth with an effective environmental agenda.
"We expect the flexible packaging market in Asia to reach $52.1 billion by 2024. Short-term disruptions due to the impact of the coronavirus are possible in the coming months but it is unlikely that the outbreak will impact long-term flexible packaging trends across the region," said Connell-French.