WTO Raises 2024 Goods Trade Forecast; But Wary Of Risks Due To Geopolitical Tensions

WTO Raises 2024 Goods Trade Forecast; But Wary Of Risks Due To Geopolitical Tensions

Geneva: The World Trade Organisation (WTO) anticipates a modest increase in global merchandise trade volumes for both 2024 and 2025, following an unexpectedly significant decline of -1.2 per cent observed in 2023.

In a comprehensive report disseminated in Geneva, the WTO posits that, by 2024 and 2025, inflationary pressures are projected to subside, thereby facilitating an upward trajectory in real incomes across advanced economies. This, in turn, is expected to bolster the consumption of manufactured goods.

"A resurgence in demand for tradable goods is already discernible for 2024. This trend is attributed to an uptick in household consumption, which is in part a response to improved income prospects," the report elucidates.

However, the WTO cautions that the forecast is subject to risks on the downside, primarily due to ongoing geopolitical tensions and policy uncertainty. The conflict in the Middle East has disrupted sea shipments between Europe and Asia, while tensions in other regions could precipitate trade fragmentation. Additionally, the rise of protectionist policies poses a threat to the recovery of trade volumes in 2024 and 2025.

The report further notes that real import demand in terms of purchasing power was notably subdued in 2023 across most regions, with Europe experiencing the most significant decline. The exceptions to this trend were the Middle East and the Commonwealth of Independent States (CIS) region, where there was a notable surge in imports.

"World real GDP growth at market exchange rates decelerated from 3.1 per cent in 2022 to 2.7 per cent in 2023, yet it is anticipated to remain relatively stable over the next two years, with projections for 2024 and 2025 at 2.6 per cent and 2.7 per cent, respectively," the report states. This divergence between the steady growth of GDP and the slowdown in merchandise trade volumes is attributed to inflationary pressures, which have negatively impacted the consumption of trade-intensive goods, particularly among major trading nations.

The report also highlights that the value of world merchandise trade declined by 5 per cent in 2023 to reach USD 24.01 trillion. However, this decline was largely offset by a robust increase in commercial services trade, which saw a 9 per cent rise to USD 7.54 trillion. The decline in merchandise exports can be attributed to falling commodity prices, notably for oil and gas. Conversely, the commercial services sector experienced a resurgence, propelled by the recovery of international travel and the surge in digitally delivered services.

The report underscores that global trade has demonstrated remarkable resilience in the face of numerous significant economic shocks. By the end of 2023, merchandise trade volumes had rebounded by 6.3 per cent compared to the previous year. Similarly, commercial services trade also experienced growth, with annual values increasing by 21 per cent between 2019 and 2023.

"In 2024 and 2025, inflation is expected to gradually abate, thereby allowing for a resurgence in real incomes across advanced economies. This, in turn, is anticipated to stimulate the consumption of manufactured goods, marking a recovery in demand for tradable goods," the report concludes.

 

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