The World Trade Organization announced on Wednesday that global trade is expected to rebound this year after experiencing an unexpected slump in 2023. However, it cautioned that regional conflicts, geopolitical tensions, and economic policy uncertainty could darken the outlook.
In its annual trade forecast, the WTO revealed that world trade volumes declined by 1.2 percent in 2023. This downgrade was primarily attributed to the underperformance of Europe, according to WTO chief economist Ralph Ossa. Lingering high energy prices and inflation led to decreased demand for manufactured goods, resulting in stagnation in the eurozone economy in the final quarter of the previous year, with Germany’s economy contracting by 0.3 percent.
Nevertheless, there is already a recovery in global trade of goods underway, partially due to inflation slowing down. The WTO forecasts modest global economic growth over the next two years, with an expected growth rate of 2.6 percent this year and 2.7 percent in 2025. Merchandise trade volumes are projected to increase by 2.6 percent in 2024 and further expand by 3.3 percent in 2025. However, the 2024 forecast is lower than the 3.3-percent hike predicted by the WTO last October.
“We are making progress towards global trade recovery,” stated WTO chief Ngozi Okonjo-Iweala, emphasizing the importance of mitigating risks such as geopolitical strife and trade fragmentation.
The organization highlighted more positive developments in trade on the services side, which grew by nine percent last year. The WTO expects further growth this year, particularly in tourism and passenger transport associated with the upcoming Olympic Games in Paris and the European football championships.
The WTO anticipates that inflationary pressures that impacted trade last year will ease in 2024. This is expected to lead to real income growth, particularly in advanced economies, and subsequently boost the consumption of manufactured goods.
Despite signs of recovery, the WTO cautioned that geopolitical tensions and policy uncertainty could limit the extent of the trade rebound. Disruptions in the Red Sea crisis and Suez Canal linked to the conflict in Gaza have already affected sectors such as automotive products, fertilizers, and retail.
While trade remains relatively resilient, the WTO has raised concerns about growing fragmentation and protectionist behavior in global trade. Bilateral trade between the United States and China reached record levels in 2022, but trade growth between the two countries was 30 percent lower than with other nations last year.
The organization has also warned about increasing protectionist tendencies among certain countries, without explicitly naming them. The WTO chief economist underscored the importance of upcoming elections worldwide, including pivotal ones like in the United States, which could significantly impact trade policies and contribute to trade policy uncertainty.
