The World Trade Organization (WTO) released a report today with a cautiously optimistic outlook on global trade. While a rebound is expected this year following a 2023 contraction, the WTO warns that geopolitical tensions and policy uncertainty could hinder progress.
Gradual Recovery on the Horizon
The report predicts a 2.6% increase in global merchandise trade volume for 2024, rising to 3.3% in 2025. This follows a 1.2% decline in 2023 attributed to lingering effects of high energy prices and inflation.
Positive Signs
The WTO cites factors like easing inflationary pressures and rising real incomes, particularly in developed economies, as reasons for optimism. Additionally, a rise in new export orders points towards potentially improved trade conditions in 2024.
WTO Director-General Ngozi Okonjo-Iweala emphasized the importance of mitigating geopolitical risks and trade fragmentation to ensure continued economic growth.
2023 Trade in Review
High energy prices and inflation significantly impacted demand for manufactured goods in 2023. Merchandise trade volume fell 1.2%, with a steeper decline in value terms (5% decrease in exports). However, commercial services exports fared better, growing by 9%.
Geopolitical Tensions: A Double-Edged Sword
While the report acknowledges limited trade disruption due to geopolitical events like the Red Sea crisis, it warns of potential future issues. Food and energy prices could be subject to spikes depending on global events.
Early Signs of Fragmentation
The report identifies a slight shift in trade patterns, with US trade with China growing slower than trade with other regions. Additionally, global trade in intermediate goods, a vital indicator of global value chain health, declined by 6% in 2023.
Services Trade: A Bright Spot
Despite challenges, global commercial services trade grew 9% in 2023, driven by recovering international travel and a surge in digitally delivered services. This trend is expected to continue in 2024, bolstered by upcoming sporting events and relaxed visa restrictions in some countries.
Digital Trade Booming
Global exports of digitally delivered services reached a record high of $4.25 trillion in 2023. This sector is projected to maintain its strong growth trajectory, particularly in Africa, South and Central America, and the Caribbean.
Regional Variations
Africa is expected to lead export growth in 2024 (5.3%), followed by the CIS region (slightly below 5.3%). Other regions are predicted to see moderate growth, with Europe lagging behind. Import growth will be strongest in Asia and Africa, while remaining below average in most other regions.
Least Developed Countries
The WTO forecasts slower but still positive export growth for least-developed countries (LDCs) in 2024, with a rebound expected in 2025. LDC imports are also projected to increase in the coming years.
Looking Ahead
The WTO remains cautiously optimistic about a global trade rebound in 2024 and 2025. However, effectively managing geopolitical tensions and fostering international cooperation will be crucial in achieving and sustaining this growth.
