SOUTHEAST ASIA’s output growth is projected to expand 4.1% this year, with trade disruptions, tighter-for-longer rates, and supply pressures weighing on performance, the United Nations Conference on Trade and Development (UNCTAD) said.
In its Trade and Development Report Update, UNCTAD said low water levels at the Panama Canal and attacks on shipping in the Red Sea, which leads to the Suez Canal, have raised costs and extended travel times.
“Trade between Asia and Europe, together with maritime routes going between the Pacific and the Atlantic coasts of the Americas, have experienced severe disruption,” according to the report.
Prolonged drought at the Panama Canal caused tolls to rise by eight times, while the reduced number of crossings resulted in longer waiting times to transit the waterway.
However, the crisis at the Panama Canal is expected to improve as the rainy season begins in late April to early May.
UNCTAD also noted that attacks by Yemen’s Houthi rebels have forced major freight rerouting around the Cape of Good Hope instead of the Suez Canal, adding around 12 to 20 days of transport time.
“The cost of moving containers from Shanghai to Genoa or Rotterdam more than tripled between October 2023 and mid-March 2024. Meanwhile, the cost of transporting containers from Shanghai to Los Angeles doubled,” according to the report.
The growth of merchandise trade is projected to remain subdued this year. However, trade in services is expected to outpace trade in goods this year. Main drivers of services trade include travel, transportation, telecommunications, computers and information.
Growth in the global economy is expected to decelerate for a third consecutive year to 2.6% this year, from 2.7% in 2023. Growth during the 2015-2019 period averaged 3.2%.
Private consumption would be the main driver of growth this year at 4%, outpacing the expansion in income of 2.6%.
“For the developing countries, constrained fiscal space in the context of growing debt challenges means a further restricting of public budgets and investment,” UNCTAD said.
It also cited the lack of global investments in risks such as climate change and development. “Years of underinvestment are depriving the world of the resources required to enable sustainable development.”
Commodity prices remain significantly higher than the pre-pandemic period, especially in energy and metals (40%) and food (35%). — Beatriz Marie D. Cruz
