Houthi attack may increase inflation

Tensions are still high in the Red Sea. Houthi rebels have been increasing attacks on ships, forcing many shipping companies to avoid this key east-west global trade route. These attacks have a significant impact on international trade and undermine governments’ efforts to reduce inflation.

This observation is shared by some analysts who warn about the impact of these attacks on inflation. The Organization for Economic Co-operation and Development (OECD) agrees in its report on the global economic outlook for 2024, which is published this Monday, February 5. ” Attacks on ships in the Red Sea have sharply increased shipping costs and extended delivery times, disrupting production schedules and adding to price pressures.

notes the OECD.

” Escalating geopolitical tensions pose significant medium-term risks to activity and inflation, particularly if conflict in the Middle East causes disruptions in energy markets. », further indicates the report of the Economic Institute which adds that “ Persistence of tensions on services prices could also lead to an unexpected rise in inflation and trigger price corrections in financial markets as expectations for monetary easing are reassessed. “

A cut in growth forecasts for Europe that risks a rise in inflation

The OECD also warns that “ If the results of past increases in key rates are more marked, growth may be more modest than predicted by projections.

Given that ” However, it must be emphasized that the organization remains optimistic, assuring that “ Inflation expected to return to target in most G20 countries by end-2025 », expected to be 2.6% this year and 2.4% next year. Regarding growth, the organization has revised its forecasts upwards. Global GDP is expected to grow by 2.9% compared to an estimated 2.7% in November.

However, the euro zone will not benefit from this increase. The organization assures that growth in the euro zone will be suppressed by these first two economies, namely France, which will see its GDP grow by 0.6% this year, or 0.2 points less than the November forecast. , and Germany, which will see. Its own increase of 0.3%, or 0.3 points less than the previous estimate. Thus, growth will be 0.6% in 2024, down 0.3 points from the November forecast, and 1.3% in 2025, down 0.2 points from the previous forecast, the report also said.