WTO Projects 2.6% Growth In Global Goods Trade For 2024 Despite Geopolitical Tensions

The World Trade Organisation (WTO) forecasts a 2.6% rise in global merchandise trade volume for 2024, followed by a 3.3% increase in 2025. This comes after an unexpected decline of -1.2% in 2023. The WTO report highlights that inflation is likely to ease over the next two years, enhancing real incomes and boosting consumption of manufactured goods in advanced economies.

Inflationary pressures are expected to diminish gradually, leading to improved income prospects and increased household consumption. This trend is anticipated to drive demand for tradable goods in 2024. "A recovery of demand for tradable goods in 2024 is already evident," the report states, linking this to better income expectations.

Despite these positive projections, the WTO warns of potential risks due to geopolitical tensions and policy uncertainties. Conflicts in the Middle East have disrupted sea shipments between Europe and Asia, while tensions elsewhere could fragment trade further. Rising protectionism poses another threat to trade recovery in the coming years.

In 2023, import demand was weak across most regions, notably in Europe, North America, and Asia. However, the Middle East and the Commonwealth of Independent States (CIS) saw significant import growth. The report notes that world real GDP growth slowed from 3.1% in 2022 to 2.7% in 2023 but is expected to stabilise at around 2.6% in 2024 and 2.7% in 2025.

The disparity between steady GDP growth and declining merchandise trade volume is attributed to inflation's impact on consumption of trade-intensive goods, especially among major trading nations. The US dollar value of global merchandise trade dropped by 5% in 2023 to US$24.01 trillion.

Commercial Services Trade

This decline was largely counterbalanced by a robust increase in commercial services trade, which surged by 9% to US$7.54 trillion. Falling commodity prices, such as oil and gas, contributed to the decrease in merchandise exports. Meanwhile, commercial services benefited from recovering international travel and a surge in digitally delivered services.

The WTO report underscores that world trade has shown remarkable resilience despite several economic shocks over recent years. By late 2023, merchandise trade volume had risen by 6.3% compared to pre-pandemic levels in 2019.

Commercial services also experienced significant growth with annual US dollar values increasing by 21% between 2019 and 2023. "In 2024 and 2025, inflation is expected to gradually abate," reiterates the report, highlighting its positive impact on real incomes and consumption patterns.

The outlook for global trade remains cautiously optimistic as inflation eases and income prospects improve across advanced economies. However, geopolitical tensions and rising protectionism continue to pose challenges that could affect future trade dynamics.

With inputs from WAM