Date Added: 1 May 2024
WTO forecasts rebound in global trade
Davies Turner notes that World Trade Organisation economists forecast that global goods trade is expected to pick up gradually this year following a contraction in 2023 that was driven by the lingering effects of high energy prices and inflation.
The WTO economists predict that the volume of world merchandise trade should increase by 2.6 percent in 2024 and 3.3 percent in 2025 after falling 1.2 percent in 2023, which should be good news for us as a provider of international freight and logistics services that underpin international trade, as well as the businesses involved in that trade.
WTO does point out, however, that regional conflicts, geopolitical tensions and economic policy uncertainty pose substantial downside risks to the forecast.
In the latest “Global Trade Outlook and Statistics” report, WTO economists note that inflationary pressures are expected to abate this year, allowing real incomes to grow again — particularly in advanced economies — thus providing a boost to the consumption of manufactured goods. A recovery of demand for tradeable goods in 2024 is already evident, with indices of new export orders pointing to improving conditions for trade at the start of the year.
WTO Director-General Ngozi Okonjo-Iweala said: “We are making progress towards global trade recovery, thanks to resilient supply chains and a solid multilateral trading framework — which are vital for improving livelihoods and welfare. It’s imperative that we mitigate risks like geopolitical strife and trade fragmentation to maintain economic growth and stability.”
High energy prices and inflation continued to weigh heavily on demand for manufactured goods, resulting in a 1.2 percent decline in world merchandise trade volume for 2023. The decline was larger in value terms, with merchandise exports down five percent to US$ 24.01 trillion.
Downside risks
Moving forward, the report warns that geopolitical tensions and policy uncertainty could limit the extent of the trade rebound. Food and energy prices could again be subject to price spikes linked to geopolitical events. The report’s special analytical section on the Red Sea crisis notes that while the economic impact of the Suez Canal disruptions stemming from the Middle East conflict has so far been relatively limited, some sectors, such as automotive products, fertilisers and retail, have already been affected by delays and freight costs hikes.
The report presents new data indicating that geopolitical tensions have affected trade patterns marginally but have not triggered a sustained trend toward deglobalization. Bilateral trade between the United States and China, which reached a record high in 2022, grew 30 percent less in 2023 than did their trade with the rest of the world. For the whole of 2023, global trade in non-fuel intermediate goods — which provides a useful gauge of the status of global value chains — was down six percent.
WTO Chief Economist Ralph Ossa said: “Some governments have become more sceptical about the benefits of trade and have taken steps aimed at re-shoring production and shifting trade towards friendly nations. The resilience of trade is also being tested by disruptions on two of the world’s main shipping routes: the Panama Canal, which is affected by freshwater shortages, and the diversion of traffic away from the Red Sea. Under these conditions of sustained disruptions, geopolitical tensions, and policy uncertainty, risks to the trade outlook are tilted to the downside.”
Regional trade outlook
If current projections hold, Africa’s exports will grow faster than those of any other region in 2024, up 5.3 percent; this however is from a low base, since the continent’s exports remained depressed after the COVID-19 pandemic.
North America (3.6 percent), the Middle East (3.5 percent) and Asia (3.4 percent) should all see moderate export growth, while South America is expected to grow more slowly, at 2.6 percent. European exports are once again expected to lag behind those of other regions, with growth of just 1.7 percent.
Strong import volume growth of 5.6 percent in Asia and 4.4 percent in Africa should help prop up global demand for traded goods this year. However, all other regions are expected to see below average import growth, including South America (2.7 percent), the Middle East (1.2 percent), North America (one percent), Europe (0.1 percent) and the CIS region (-3.8 percent).
Merchandise exports of least-developed countries (LDCs) are forecasted to grow 2.7 percent in 2024, down from 4.1 percent in 2023, before growth accelerates to 4.2 percent in 2025. Meanwhile, imports by LDCs should grow six percent this year and 6.8 percent next year following a 3.5 percent contraction in 2023.
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