Page 13 - Policy Economic Report - October 2024

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

The return of inflation near central bank targets paves the way for a policy triple pivot.

• The first pivot—on monetary policy—is under way already. Since June, major central banks in
advanced economies have started to cut policy rates, moving toward a neutral stance. This
will support activity at a time when many advanced economies’ labor markets are showing
signs of cooling, with rising unemployment rates.

• The second pivot is on fiscal policy. Fiscal space is a cornerstone of macroeconomic and
financial stability. After years of loose fiscal policy in many countries, it is now time to stabilize
debt dynamics and rebuild much-needed fiscal buffers.

• The third pivot is towards growth-enhancing reforms. Much more needs to be done to
improve growth prospects and lift productivity. Focus should be on rebuilding fiscal buffers;
coping with aging and shrinking populations in many parts of the world; tackling the climate
transition; increasing resilience, and improving the lives of the most vulnerable, within and
across countries.

3. Asia: Shipping capacity remains strong despite global shocks
According to Review of Maritime Transport released on 22nd October, 2024, Asia, with the strength
of its maritime transport sector, is still the region best-connected to global shipping networks. The
report shows Asian economies retaining top spots on the global Liner Shipping Connectivity Index,
with China coming out on top, followed by the Republic of Korea and Singapore. Vietnam has recorded
the highest long-term increase of 199% in connectivity since 2006.

The index first introduced in 2004 was computed by UN Trade and Development (UNCTAD). It is based
on main components of the maritime transport sector such as ship sizes, deployed capacity, numbers
of service providers and weekly calls. Looking at shipping building, China, Japan, and the Republic of
Korea continue their dominance, accounting for about 95% of global output. For the first time, China
delivered over half of the world’s new ships in 2023.

Global trade routes disruptions pose challenges to Asia
In an increasingly interconnected world, geopolitical tensions and impacts of climate change have
global repercussions, including in Asia. Conflict in the Red Sea has severely affected shipping through
the Suez Canal and exacerbated congestion in major ports elsewhere in Asia. Between March and
May 2024, waiting times in Singapore nearly doubled from 24 to 40 hours, while in Port Klang,
Malaysia, the number went up from 20 to 26 hours. Faced with low water levels linked to climate-
induced droughts, draft restrictions in the Panama Canal in 2023 led to shipment delays and higher
costs. This has impacted trade routes exporting grains and minor bulk commodities from the Americas
to Asia, with a 31% increase in sailing distances for completed journeys and a 25% decrease in cargo
volume.

October 2024 Page | 12