BIMCO: Global Economic Growth Beneficial for Shipping

If it materializes, global economic growth in 2018 and 2019 will be highly beneficial for the container shipping industry, BIMCO said in its latest macroeconomics shipping market outlook.

With global long-term growth projected to rise only moderately in the coming years, it is essential that nations implement structural reforms to unleash any additional growth potential, the report says.

As explained, improving the economic growth potential through structural reforms supports productivity, and thereby improves the medium and long-term derived demand for the shipping industry.

The International Monetary Fund (IMF) expects the US tax bill to generate plenty of activity after hiking the growth for the US by 0.4 percentage points for 2018 to 2.7%, and by 0.6 for 2019 to 2.5%. They estimate that half of the upward revision for the global growth projection for 2018 and 2019 will be driven by US output and the positive effect it may have on its trading partners.

For shipping, a possible boost in investment will lead to higher demand and increased trade, if it is not absorbed by inward-looking policy requirements, according to BIMCO.

For the container shipping industry, the economic picture in the US is said to be favorable with a possible pick up in wages boosting consumer demand.

In the outlook, BIMCO said it has been quite some time since macroeconomic development has looked this positive and as supportive of shipping.

Political events can undermine the development, but 2018 appears to bring fewer economic growth “derailing” events compared to 2017. The most important factors to potentially derail growth are likely to be the US midterm elections in November, the renegotiation of the NAFTA and the negotiation of the Brexit deal. Notwithstanding, the sustainability of the all-important Chinese economy, according to the shipping association.

For sustained economic growth, the political deals resulting from these events need to decrease the number of trade barriers and ensure regulatory alignment. This will help to encourage potential growth as restrictive trade measures can discourage trade flows and have negative knock-on effects on economic growth and job creation, BIMCO concluded.