According to a new forecast announced by WTO economists this Wednesday, April 10, global merchandise trade is expected to gradually recover this year following the contraction experienced in 2023, driven by the persistent effects of high energy prices and inflation. The volume of global merchandise trade should increase by 2.6% in 2024 and by 3.3% in 2025, after a 1.2% decrease recorded in 2023.
In the “Global Trade Outlook and Statistics” report, WTO economists indicate that inflationary pressures should ease this year, allowing real incomes to rise again, particularly in advanced economies, which will boost the consumption of manufactured products. The recovery in demand for tradable goods in 2024 is already clearly visible, with new export orders indices pointing to improved conditions for trade early in the year.
WTO Director-General Ngozi Okonjo-Iweala stated, “We are moving towards the recovery of global trade, thanks to the resilience of supply chains and the robust multilateral trade framework, which are essential for improving livelihoods and well-being. It is imperative that we mitigate risks such as geopolitical conflicts and trade fragmentation to maintain economic growth and stability.”
High energy prices and inflation continued to weigh significantly on the demand for manufactured products, resulting in a 1.2% decrease in the volume of global merchandise trade in 2023. The decline was greater in value terms, with merchandise exports falling by 5% to USD 24.01 trillion. The evolution of trade in the services sector was more encouraging: commercial services exports increased by 9%, reaching a value of USD 7.54 trillion, partially offsetting the decline in merchandise trade.
Import volumes decreased in most regions, but especially in Europe, where they recorded a sharp drop. The main exceptions were major fuel-exporting economies, whose imports were supported by strong export revenues, as energy prices remained high compared to historical levels. Global trade remained well above its pre-pandemic level throughout 2023. In the fourth quarter, its level was practically identical to that recorded in the same period in 2022 (+0.1%) and had only increased slightly compared to the same period in 2021 (+0.5%).
Downside Risks
Looking ahead, the report warns that geopolitical tensions and political uncertainty could limit the scope of trade recovery. Food and energy prices could again experience sharp rises due to geopolitical events. According to the report’s special analytical section on the Red Sea crisis, while the economic impact of Suez Canal disruptions resulting from the Middle East conflict has so far been relatively limited, some sectors (automotive industry products, fertilizers, and retail trade) have already been affected by delays and increased freight costs.
Additionally, the report presents new data indicating that geopolitical tensions have marginally affected trade but have not triggered a sustained trend towards deglobalization. Bilateral trade between the United States and China, which reached an unprecedented peak in 2022, grew 30% less in 2023 than it did in their trade with the rest of the world. Moreover, throughout 2023, global trade in non-fuel intermediate goods, which provides an idea of the state of global value chains, decreased by 6%.
Source: Financial Food