15th January 2024
Hugues Chevalier, Economist
Global economic growth was better than expected at the end of 2023, particularly in the United States. In Europe, however, the twin shocks of rising interest rates and soaring energy prices have weighed on economic growth, which stagnated in 2023. It could even contract slightly this year. With inflation falling in recent months, the question arises as to whether key interest rates will be cut this year. According to information released by the central banks, the Fed is set to cut rates three times this year. The ECB is also expected to follow suit from this spring. But this scenario of further falling inflation and lower interest rates could be thwarted by geopolitical uncertainties. An outbreak of conflict in the Middle East (Lebanon, Yemen and Iran) could have an impact on the price of oil and goods imported from Asia. Already, several shipping companies are avoiding the Suez Canal and now pass through the Cape of Good Hope, lengthening their journeys by several thousand kilometres, which will inevitably have repercussions on import and energy prices. The prices charged by one of the major shipping companies have already doubled on Asia-Europe routes. In addition, the intensification of Russian attacks in Ukraine could cost Europe billions more, particularly in terms of military and civilian aid to Kiev, but also through a further rise in food prices if the “new routes” for Ukrainian exports were cut off again. Added to these risks is that of the outcome of the US elections at the end of the year, which could once again change the course of trade relations with Europe. 2024 could well be a year when business in Europe picks up again, provided that geopolitical uncertainties do not lead to further price rises.