ECONOMY

Shipping sector benefits from strong global growth

It may be particularly hard to determine the exact course of the global economy in the short term, but data such as gross national product (GNP) and industrial output provide indications to international business circles of fluctuations in shipping transactions. Worldwide GNP grew by 5.3 percent in 2004 and 4.8 percent in 2005. Such high growth levels had been unseen for at least 30 years – since 1973. With two consecutive years of such growth, it is easy to explain what has recently happened in the shipping market. By the way, the biggest growth was not in China, as most people believe, but in Azerbaijan (26 percent). When comparing the growth of Atlantic countries with those in the Far East, after the small decline in 2001, the rise has been sharp and spectacular. In Asia, growth reached 7 percent, an impressive figure for a four-year period, which had been repeated between 1993-1997. Over in the Atlantic, the picture is different, with annual industrial output growth barely exceeding 1 percent per annum over the last four years, driven by the developed economies of Western Europe and the USA. Interest remains focused on the trend of the global economy, with analysts expecting the the positive course to be maintained. The International Monetary Fund forecasts an average world GNP growth of 4.7 percent in 2007, similar to that of the current year, which is a significantly high percentage for the fifth straight year. The IMF study further predicts that the US economy will grow by 3.3 percent in 2007 and the EU by 2.3 percent, following the course of the last four years. In the Far East, the picture also stays the same, with China growing by 9 percent and the nearby developing states by 4.5 percent. Given these forecasts, the growth of the global economy will maintain its positive course, although special weight ought to be attributed to the fine print: These forecasts are based on an average oil price of $25-30 per barrel, while recent deals for future oil contracts put oil prices at $60 per barrel. The absence of a crisis is thanks to the fact that oil prices rose after the pressure exercised by global suppliers, following the growth of the global economy, with economists taking for granted that the maintenance of the high price will have negative consequences on growth. Another key factor will be the course of the US deficit, which in the last few years was funded by the surpluses of the Far East and recently by the dollars coming from oil’s rising price. Forecasts depend on each person’s viewpoint on the future. The optimists are looking forward to Chinese growth with the hosting of the Olympic Games of 2008 and its future growth, while the pessimists foresee an underlying collateral crisis after four consecutive years of growth. Consequently, deciding whether to pay $93 million for a capesize tanker with immediate delivery dates will make little difference within the context of the global economy.