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In the latest report on “Global Trade Outlook and Statistics” released by the World Trade Organisation (WTO), economists have shared a cautiously optimistic view of the global trade landscape.
According to the report, inflationary pressures, which have been a significant concern in recent times, are anticipated to ease this year. This alleviation is expected to allow for the growth of real incomes, particularly in more advanced economies, thereby potentially increasing the consumption of manufactured goods.
An evident recovery in the demand for tradable goods is already observable in 2024, with indices of new export orders signalling improving trade conditions at the year’s commencement.
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.”
The report also highlights some of the ongoing challenges in the global trade sector. High energy prices and persistent inflation have adversely impacted the demand for manufactured goods, leading to a 1.2% drop in the volume of world merchandise trade for 2023.
This decline is more pronounced in value terms, with merchandise exports decreasing by 5% to $24.01 trillion. However, the trade scenario appears more positive on the services side, with a 9% increase in commercial services exports to $7.54 trillion, partially counterbalancing the decline in goods trade.
Despite these challenges, world trade levels remained robust throughout 2023, staying well above pre-pandemic figures. By the fourth quarter, trade was nearly unchanged compared to the same period in 2022 and had risen slightly when compared to 2021.
The report also delves into the global economic growth forecasts, estimating that global GDP growth at market exchange rates will hover around 2.6% in 2024 and 2.7% in 2025, marking a slight deceleration from 3.1% in 2022 to 2.7% in 2023.
The discrepancy between steady real GDP growth and the slowdown in real merchandise trade volume can be attributed to inflationary pressures negatively impacting the consumption of trade-intensive goods, especially in Europe and North America.
A special analytical section of the report addresses the potential impact of geopolitical tensions on trade, particularly highlighting the Red Sea crisis. While the Suez Canal disruptions stemming from the Middle East conflict have had a relatively limited economic impact thus far, sectors such as automotive products, fertilisers, and retail have felt the pinch due to delays and increased freight costs.
The report further explores the nuanced effects of geopolitical tensions on trade patterns, noting a marginal impact but no significant trend towards de-globalisation. It mentions the bilateral trade dynamics between the United States and China and observes emerging signs of fragmentation in services trade, particularly in information, computer, and telecommunications (ICT) services.
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.”
The report provides an optimistic view for certain regions, predicting that Africa’s exports will see the fastest growth in 2024, albeit from a low base. Other regions, such as the CIS, North America, the Middle East, and Asia, are also expected to witness moderate growth in exports. However, European exports might lag behind, reflecting slower growth.
The report offers a mixed outlook for global trade, with signs of recovery and growth amidst prevailing challenges and uncertainties. The full report, including detailed data and analyses, is available through the WTO’s publication platforms.
