The WTO is forecasting a recovery in world trade this year, but conflicts, geopolitical tensions and economic policy uncertainty pose significant downside risks to the forecast, it said on Wednesday.
Volume growth (adjusted for inflation) in world merchandise trade is expected to be 2.6% in 2024 (compared with a forecast of 3.3% in October) and 3.3% in 2025, after falling last year, according to the World Trade Organization’s annual forecast.
“We are making progress towards a recovery in world trade, thanks to resilient supply chains and a strong multilateral trade framework,” commented WTO Director General Ngozi Okonjo-Iweala.
“Limiting risks such as geopolitical unrest and trade fragmentation is imperative to maintaining economic growth and stability,” she warned.
The report also estimates that global GDP growth will remain broadly stable over the next two years, reaching 2.6% in 2024 and 2.7% in 2025.
High energy prices and inflation continued to weigh heavily on demand for manufactured goods last year, resulting in a 1.2% drop in world merchandise trade volumes, compared with the WTO’s forecast of +0.8% in October.
“The downward revision is mainly due to Europe’s worse-than-expected results,” explained the WTO’s chief economist, Ralph Ossa, in an interview with AFP.
Olympic Games-2024 and Euro-2024
The WTO does not make forecasts for world trade in services, but points out that it grew by 9% in 2023, and the organization expects sporting events due to take place in Europe over the summer (Olympic Games and Euro-2024) to boost tourism and passenger transport.
Inflationary pressures should ease this year, allowing real incomes to grow again – particularly in advanced economies – which will stimulate consumption of manufactured goods, according to the WTO, which notes that a recovery is already evident.
But geopolitical tensions and economic policy uncertainty could lead to sharp rises in food and energy prices, limiting the extent of the recovery.
According to the WTO, while the economic impact of the disruptions in the Suez Canal resulting from the war in Gaza has so far been relatively limited, some sectors, such as automotive products, fertilizers and retail, have already been affected by delays and higher freight costs.
“We’re still in a period where trade is relatively resilient” and “we’re absolutely not seeing deglobalization” but there are signs of “fragmentation” of world trade, observed Mr. Ossa.
Protectionism
Thus, he pointed out, bilateral trade between the USA and China, which had reached a record level in 2022, recorded 30% lower growth in 2023 than the two countries’ trade with the rest of the world.
There are also signs of fragmentation in trade in services: US imports of information and communication technology services from Canada rose in 2023, while those from Asia (mainly India) fell.
The WTO warns that certain countries or policies may be inclined to increase protectionism, but refuses to name names.
“We are clearly at an important moment in the history of globalization. I think many governments are perhaps evaluating or reassessing their trade policy choices, and of course this will have consequences for the way in which international trade evolves,” explained Mr. Ossa.
Just “the fact that we don’t know how some of these political choices are made, and this uncertainty about trade policy, is in itself a brake on international trade”, he said, pointing to the dozens of elections taking place around the world this year, including in the USA.
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