•Since November, the Houthi rebels have repeatedly targeted ships in the Red Sea and surrounding waters over the Israel-Hamas war.
•This has seen global shipping lines avoid the Red Sea and the Suez Canal, a key trading route accounting for up to 15 per cent of seaborne trade globally.
Image: FILE
Attacks on vessels in the Red Sea by Yemen’s Houthi rebels are now exposing countries to inflationary pressures, IMF has warned, with Sub-Saharan Africa among those facing the highest risk.
Since November, the rebels have repeatedly targeted ships in the Red Sea and surrounding waters over the Israel-Hamas war.
This has seen global shipping lines avoid the Red Sea and the Suez Canal, a key trading route accounting for up to 15 per cent of seaborne trade globally and a major channel that serves Mombasa and the East African ports. It is also the shortest maritime route between Asia and Europe.
Several shipping companies diverted their ships around the Cape of Good Hope in South Africa, increasing delivery times by 10 days or more on average, which IMF says has hurt companies with limited inventories.
“Our high-frequency transit estimates indicate that the volume of trade that passed through the Suez Canal dropped by 50 per cent year-over-year in the first two months of the year, and the volume of trade transiting around the Cape of Good Hope surged by an estimated 74 per cent above last year’s level,” IMF said in its Chart of the Week .
Data from its PortWatch platform, used to show trade volume that transits through critical shipping lanes, indicates that in January and February 2024, there was a 6.7 per cent decline year-over-year in port calls to the 70 ports it tracks in sub-Saharan Africa.
The corresponding declines for the European Union and the Middle East and Central Asia were 5.3 per cent.
“These decreases likely reflect the transitory effects of longer shipping times. If continued, the ripple effects of these disruptions could temporarily hamper some supply chains in affected countries and cause upward pressure on inflation (in part due to higher shipping costs),” IMF said.
An important implication of these shipping disruptions is that official statistics on recorded imports (and exports) based on customs records may be affected by the temporary impact of ships being re-routed, it noted.
This will make it more difficult to gauge the underlying momentum of global trade and economic activity in the coming months.
For example, merchandise trade reports for January in many countries in Africa, the Middle East and Europe may show slowing import growth, as some imports that would normally have been recorded in January were only delivered in February.
“For the same reason, many low-income countries that obtain a significant share of their fiscal revenues from import duties (and export taxes) may report lower fiscal revenue than expected for January,” it noted.
Another major worry for IMF is the drop in trade volumes passing through the Panama Canal, which have fallen by about 32 per cent, disrupting supply chains and distorting key macroeconomic indicators.
The Panama has been hit by a severe drought, forcing authorities to impose restrictions that have substantially reduced daily ship crossings since last October, slowing down maritime trade through another key chokepoint that usually accounts for about five per cent of global maritime trade.