Red Sea crisis: -0.9% for the European economy

If the Red Sea crisis continues for several more months, it will be sensitive for the world economy. Procurement of goods becomes significantly more expensive. Additionally, the slowdown is significant. As a result, global GDP growth slows by -0.4% and inflation increases by +0.5%. This is what our research department estimated.

A third of global container traffic and 40% of trade between Asia and Europe passes through the Red Sea. Some shipping companies change their itinerary and choose to bypass Africa. Over the past two weeks, the number of cargo ships passing through the Suez Canal has fallen, by 30% for cargo and 19% for tankers. The number of ships around the Cape of Good Hope almost doubled during the same period (cargo increased by +66% and tankers by +65%).

Johan Geeroms, our Director of Risk Underwriting Benelux: “With the global economy going through a weaker period, the impact of supply chain disruption remains relatively low today. Demand in the United States and Europe decreased by 10% compared to 2021 and inventories are still relatively high. But if the crisis continues for several months, the global economy will suffer the consequences.”

Take the example of energy: 12% of tankers use the Suez Canal which connects the Red Sea to the Mediterranean. For liquefied gas, the figure is 8%. The crisis will lead to a further rise in energy prices in Europe. This is bad news for citizens and businesses.

The price of container transport has more than doubled in two months (+240%). However, it is still only a quarter of the peak reached in 2021. In addition to weak demand and increasing inventories, the fact that the shipping industry has increased its capacity with new container ships is a postman. The upside risk is significant, but remains significantly lower than in 2021.

It is in Europe that the impact of increased transport costs is greatest. In a few months, if the conflict persists, this will increase European inflation by +0.7 percentage points. The growth of the European economy will then suffer a drop of -0.9 percentage points.

Johan Geeroms: “The European and American economies are in a precarious balance. This disruption could push in the wrong direction. In Europe, we are trying to get out of the recession. This crisis is slowing down the recovery. Many businesses are already struggling with reduced margins. The number of bankruptcies will certainly be higher than expected. »