1-The world economy in 2018
The situation in brief
The year 2018 paves the way for growth for all the major economic blocs of the world that are America, Asia, and Europe. The large debt that has held back the economic recovery of several countries since the recession of 2008 still leaves some traces but the situation is now considered less problematic beacause of favorable global financial environment and recovery in advanced countries. The table below shows the evolution of global growth by block size since 2016. It also presents the forecasts of the World Bank and the International Monetary Fund for 2018.
Growth of world production
Source : International monetary found (IMF), United Nation Conference on Commerce sur le commerce
(UNCTAD), World Bank
According to World Bank Global growth in 2018 will be higher than in any previous year since the 2008 recession. But the most optimistic forecasts come from the International Monetary Fund (IMF), which indicates a gain of 3.7% for 2018. Emerging markets and developing countries maintain the course. East Asian countries such as China and Indonesia will grow 6.2% on average, while those in South Asia such as India, Pakistan and Bangladesh will increase by an average of 6%. 9%.
These rates are almost twice as high as those in the United States and Europe ( 2.3% for the United States and 1.9% for Europe). This situation should stay the same for a few years.
A limited production capacity of the industrialized countries
In the short term, among the elements to be monitored, the impact of a tightening of monetary policies (normalization) in order to limit inflation. In the last quarter of 2017, rising interest rates in the US and other parts of the world remained the most likely scenario.
By the beginning of 2018, indicators on unemployment rates, the high level of market capitalization, and wage increases, which will stimulate inflation, would point to further rate hikes. Also, in the medium term, structural adjustments are still needed. Still, many commodity exporting countries are trying to adjust to lower prices as best they can. In 2018, one could expect firmer prices for raw materials, especially oil. On the developed countries’ side, production capacity will remain constrained by insufficient investment and declining productivity gains over the last five years, according to the IMF and the World Bank. In the medium term, this capacity limit will slow growth to near potential of about 1.7%.
Since global economic activity will be increasingly tied to emerging countries, the economic weight of these new entrants into the global economic chessboard will increase. One question remains: When will the next recession come? Historically, we have become accustomed to economic cycles ranging from 5 to 10 years (1973, 1982, 1990, 2003, 2008). The current growth momentum combined with the recent rise in interest rates could be a precursor to a new inflection of the economic cycle. On the other hand, the recovery since 2008 has been so long that we could consider a longer cycle and a more moderate medium-term growth. A situation that remains difficult to predict.
Towards a new balance of currencies?
Currency equilibrium will play a particularly important role in the context of 2018 and a of globalized economy in which developing countries are becoming more and more economically influent. The US dollar has regained strength and continues to serve as a standard currency for international trade. The effect is to increase the costs of products imported from the United States and to increase the export revenues in United States. Since the American currency is also used as a standard, transactions in US currency are necessarily more expensive even if the goods are not transited by the United States.
US dollar as standard currency therefore affects global international trade. Some analysts believe that the US dollar will continue to gain strength in the coming years. The new interest rate hikes and a strong economy will help to perpetuate this situation.
The only weak point on the American side remain related to uncertainty policy regarding the US president’s tax plan and its protectionist aims. In addition, US indebtedness is causing concern on the part of China, which is now the main country holding Treasury bills and US currency. China has an interest in pursuing a policy of dedollarization of world trade in order to assert the yuan now recognized as a world reference currency by the IMF, along with the US dollar, the euro and the British pound.  
On the European side, the good performance of European countries also has the effect of increasing the value of the euro. It is the diffrential in US and European interest rates that would have favored the rise of the euro against the dollar, which calls into question the slowness of the US central bank to normalize its rates.  In theory, as these are linked to inflationary expectations, the convergence of prices and production costs between the two continents should lead to a stabilization of exchange rates. In practice, the situation could be quite different, especially for political reasons.
2- The situation in maritime transport
Maritime demand is still higher than GDP growth. The following chart shows the growth of four key indicators between 1975 and 2016: the world’s merchandise trade, GDP, maritime trade and the OECD industrial production index. The graph shows the strong correlation between GDP growth, international trade and maritime trade. Since 1975, the growth of merchandise and maritime trade has always been greater than that of GDP and industrial production. That of maritime trade, however, remained lower than that of merchandise trade. This suggests a growing share of other modes of transport.
GRAPH 1 Comparison of international trade, maritime trade, domestic production and industrial production indices
Source: UNCTAD, review of maritime transport, 2017
According to the UNCTAD, international trade is subject to significant structural adjustments. As an example, imported products in China dedicated for exports fell from 60% in 2000 to about 35% until recently. China’s economy is in process of industrialization and is turning more and more towards the development of its domestic demand, consequently limiting imports. Other factors could also come into play, including the global upsurge in protectionism.
UNCTAD estimates total world tonnage at 10.6 million tonnes for 2017, up 2.8% from 2.6% in 2016. Solid bulk would have increased 5.4%. While container shipping is up 4.5%, due to domestic trade in Asia and improved East-West routes. Liquid transport is affected by a decline in the production of some exporting countries and would be limited to 2% for refined petroleum products and barely 9% for crude oil. In line with the GDP growth forecasts presented above, maritime trade is expected to increase over the next three years at 3.2%, a rate higher than in previous years. Container and solid bulk transport would show the highest growth rates.
TABLE 2 Prediction of the average annual growth rate of shipping in the
world according to the different types of freighters
|Transport by sea||2,8||3,2|
|Transport by container||4,5||5,0|
|Rafined oil and gas||2,0||1,7|
Source : UNCTAD, review of maritime transport, 2017
Tonnage would increase by 3.2% annually over the next three years. Dry bulk would show the largest increase at 5.6%, followed by container transport at 5%. The increase for liquid bulk would remain relatively low, at 1.2% and 1.7% respectively for crude oil and refined petroleum and gas.
On the supply side
Growth not in phase with world GDP
According to UNCTAD, at the beginning of 2017, the shipping industry was still in an oversupply situation, a situation that contributes to keeping freight rates particularly low, although there has been an improvement since the beginning since 2017.
There is also a consolidation of supply in all major maritime segments. Maritime supply depends on a number of factors, including the number of new vessels on the market and their tonnage, but also the rate at which vessels are send away to scrap. The number of vessels increased by 2.47% between 2016 and 2017 to 93,161, but less than the tonnage, confirming the trend for larger vessels.
In the container sector, in 2017, for the first time since 2011, demand outstripped supply, due to increased demand, a decrease in the number of ship orders and an increase in the number of ships send to scrap.
Price levels give a good idea of the supply-demand balance in the industry and provide a recent picture of the situation. Charts 2 and 3 below illustrate the evolution of the price indexes for container transport and dry bulk transport. These indices indicate that freight rates have collapsed since the last recession and have never entirely recovered since, although the situation is better on the bulk side. In addition, overinvestment in larger vessels contributes to maintaining tight and even negative margins in some cases. The adjustment is therefore structural, not cyclical.
In comparing maritime data with those describing the evolution of the world economy, the industry could be out of step with the current situation. If being too slow to take advantage the actual situation, the onset of a recession could jeopardize the gains obtained and generate a significant wave of restructuring. In fact, the same question always arises: when, now, the next recession?
Index New ConText
(transport of containers)
(Price index of dry bulk transportation)
 Le prix des produits de base recule, perspective de l’économie mondiale, vers une croissance durable, Fond monétaire international
 Le huard à 60 cents US d’ici la fin de 2019. http://www.tvanouvelles.ca/2018/03/07/le-huard-a-60-cents-us-dici-la-fin-de-2019
 L’année 2018 serait-elle celle du début de la fin de dollar américain. Sputnik, https://fr.sputniknews.com/analyse/201801241034874663-usa-dollar-risque-chute/
 La guerre des changes aura bel et bien lieu, NextFinance, http://www.next-finance.net/La-guerre-des-changes-aura-bien
 Les conditions financières favorables, perspective de l’économie mondiale, vers une croissance durable, Fonds monétaire international. Octobre 2017, page 6
 Review of Maritime Transport 2017, United Nations Conference on Trade and Development, chap. World Merchandise Trade, page 5