The Greek frigate 'Hydra' sails to take part in the EU naval mission in the Red Sea, at Salamina naval base, Greece, Feb. 26, 2024. (Credit: Greek Defence Ministry/Handout via Reuters)
Attacks by Yemeni rebels on commercial ships in the Red Sea have had only a "moderate" impact on global trade, Ralph Ossa, the World Trade Organization's chief economist told AFP.
Speaking on the sidelines of the WTO's 13th ministerial conference in Abu Dhabi, Ossa said the flurry of strikes on vessels is "clearly something we have to watch."
But "I think for now, the macroeconomic impact seems to be moderate," largely because of relatively weak demand in Europe and sufficient shipping capacities, he said.
Yemen's Iran-backed Houthi rebels have been harassing ships in the Red Sea since November in a campaign they say is in solidarity with Palestinians amid the Gaza war.
The Red Sea attacks have raised insurance premiums for shipping companies, forcing many to avoid the vital route that normally carries about 12 percent of global maritime trade.
Many companies are opting for a lengthy detour around Africa, which adds considerable fuel and other costs.
"Freight rates have gone up but they are not nearly as high as they were at their peak in 2021 during the [COVID-19] pandemic," Ossa said.
While there is "anecdotal evidence of some prices going up," there is no concrete change in inflation figures because of the attacks, according to the economist.
"For that to be the case, I think we would have to see a sustained crisis in the Red Sea," he said.
"I'm not saying it's not a possibility, especially for Europe," which is especially reliant on the Suez Canal for trade, Ossa added.
The Suez Canal connects the Mediterranean Sea to the Red Sea, making it a vital passageway for goods between Europe and China.
The volume of commercial traffic passing through the Suez Canal has fallen more than 40 percent in the last two months after attacks by Houthi rebels, the United Nations said in January.
While there is no current sign of major inflation, "big risks" remain, especially if an escalation in the Red Sea leads to a spike in oil prices, Ossa said.
"This then could have significant effects on the global outlook."
Beyond the Red Sea crisis, Ossa warned that trade was generally on a downward trend.
In its latest forecast in October, the WTO assessed that global merchandise trade would expand by 0.8 percent in volume in 2023 and 3.3 percent this year.
"These projections, particularly the one for 2023, look overly optimistic now," Ossa said.
This is mainly because "Europe is doing weaker than we expected," he added.
"Europe has a disproportionately large share in world trade and this then will show up in trade figures," he added.
The chief economist said the "general slowing of the European economy" was due to high inflation, tightening monetary policy and other issues.
Attacks by Yemeni rebels on commercial ships in the Red Sea have had only a "moderate" impact on global trade, Ralph Ossa, the World Trade Organization's chief economist told AFP.
Speaking on the sidelines of the WTO's 13th ministerial conference in Abu Dhabi, Ossa said the flurry of strikes on vessels is "clearly something we have to watch."
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