Attacks by the Houthis, the Shiite armed group from Yemen, on commercial ships in the Bab al-Mandeb Strait, at the entrance to the Red Sea, have put Italy's imports at risk. “According to our estimates based on data for 2022, sea transport via the Red Sea represents approximately 16% of Italian imports of valuable goods,” we read in Bankitalia Bulletin No. 1 issued yesterday. For this reason, the government is preparing to intervene to defend Italian SMEs on two fronts. The first: a European Union naval mission against the Houthis. Last night, diplomats from France, Germany and Italy signed a joint document asking to “strengthen the European presence in the region to guarantee freedom of movement and defend the freedom of movement of goods.” The goal, as the appeal that the three countries will put to the table of the Foreign Affairs Council in Brussels on Monday, explains, is to expand and strengthen the Agenor mission “already operating in the region.” The second front is economic. If the crisis extends, Palazzo Chigi will mobilize Sace to ease the dangerous insurance increases that have hit small and medium-sized businesses in recent weeks.
GDP and cost of living
A significant portion of merchandise purchases from China, from other East Asian economies and from Persian Gulf states exporting energy raw materials pass through the route, which has become hot. “A third of Italian imports in the fashion supply chain arrive via the Red Sea,” we read in the report, “and this percentage is also high for imports of crude and refined oil and metalworking products, which make up almost 30% of Italian imports.” The country's purchases from abroad. However, the importance of this route for exports is much lower: about 7% of goods leaving Italy pass through it. The Bank of Italy explains that “if the risk of attacks on commercial ships remains high even in the first months of 2024, the need to follow alternative routes will translate into an extension of delivery times for goods imported by sea from Asia (with consequent repercussions for production chains). And another increase in sea freight rates.
Red Sea, what is the mission of European Aspis: Italian ships will also protect commercial ships from the Houthis
Via Nazionale takes a quick snapshot of the macro economy. The Italian economy recorded its pace at the end of 2023 “with GDP rising by 0.7% in the year, and for 2024 also growth will be equal to +0.6%”, we read in the bulletin that follows the analysis of Governor Fabio Panetta on Wednesday 17 in his speech to the top bankers. Italians gathered in my father's executive office. This is how the bulletin explains the slowdown phase, with growth “almost non-existent at the end of 2023.” In 2024, “economic activity is expected to gradually strengthen, supported by a recovery in disposable income and foreign demand.” The end of the super bonus will affect investments. “The decline in inflation has worsened and extended to industrial goods and services other than energy,” we read in the economic bulletin, which estimates that the rise in consumer prices will fall to 1.9 percent in 2024 (from 5.9 in 2023), and then will gradually decline to 1.7. In 2026. Core inflation will fall to 2.2 percent in the current year (from 4.5 in 2023) and fall to less than 2 percent in the following two years.
Alarm in Chigi
It is these numbers that guide the ongoing discussions at Palazzo Chigi. In the meetings held on the Red Sea crisis in recent days – where Foreign and Defense Ministers Antonio Tajani and Guido Crosetto and Undersecretary Alfredo Mantovano were at the table – the alarm was sounded about the Italian ports. “Delays in the delivery of goods can have short-term effects on the production and delivery of the final product,” we read in government reports indicating a risk. With increased insurance, only large commercial ships will be able to afford to cross the Suez Canal and enter the Mediterranean Sea. Small ships will circumnavigate and choose the Arctic route, thus favoring northern European ports, but also the trade routes of Putin's Russia. For Italian ports, this is a worrying scenario. In fact, not all ports in the country are equipped to transship and unload containers from large ships. Some do not have sufficient draft – this is the case for the port of Taranto but also partly for the port of Trieste – and risk being crushed by competition from other large ports on the Mediterranean, such as Piraeus in Greece. Hence the idea of packing Sace – the financial insurance group 100% owned by MEF – with tailored insurance packages for SMEs in the sector that allow smaller vessels to continue crossing the Strait. The file could actually end up on the Sace board table next week.
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