PROLONGED CRISIS MAY LEAD TO DOWNWARD GROWTH REVISION FOR INDIA, B'DESH: BMI RESEARCH

Trade distance, weighted by trade with individual trading partners, increased by around 30 per cent for Pakistan and India. By contrast, trade distance only increased by 2.5 per cent for Australia and 0.4 per cent for New Zealand

- NIVEDITA MUKHERJEE

A midst hostilities in the Red Sea causing major shipping companies to take the longer route between Europe and Asia around the Cape of Good Hope, South Asia remains highly vulnerable, with a prolonged disruption likely to compel a material revision downwards of the growth forecasts for India and Bangladesh, two of the fastest growing Asian economies. The BMI report expects India and Bangladesh, two of the most vulnerable economies to Red Sea shipping disruptions, to outperform in terms of GDP growth this year. If Red Sea disruptions were to persist, the resulting downward revisions to our India and Bangladesh forecasts will likely be significant and would dent our 4.0 per cent growth forecast for Asia in 2024.

Attacks by the Iran-backed Houthi rebel organisation on commercial vessels in the Red Sea have persisted into February 2024, increasing the risk that the crisis will have a material impact on economic growth and inflation across Asia. The Red Sea is a key maritime shipping route linked directly to the Suez Canal which substantially reduces the maritime trade distance between Europe and Asia and carries a significant 12 per cent of global trade.