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

The World Trade Organisation (WTO) has expected world merchandise trade volume to grow 2.6 per cent in 2024 and 3.3 per cent in 2025, following a larger-than-expected decline of -1.2 per cent in 2023.

In a report released today, the WTO said that in 2024 and 2025, inflation is expected to gradually abate, allowing real incomes to grow again in advanced economies and boosting consumption of manufactured goods.

"A recovery of demand for tradable goods in 2024 is already evident. This is related to an increase in household consumption linked to improved income prospects."

However, the World Organisation said that risks to the forecast are on the downside "due to current geopolitical tensions and policy uncertainty. Conflict in the Middle East has diverted sea shipments between Europe and Asia while tensions elsewhere could lead to trade fragmentation. Rising protectionism is another risk that could undermine the recovery of trade in 2024 and 2025."

It added that import demand in real terms was weak in 2023 in most regions, especially in Europe but also in North America and Asia. The main exceptions were the Middle East and the Commonwealth of Independent States (CIS) region, where imports surged.

"World real GDP growth at market exchange rates slowed from 3.1 per cent in 2022 to 2.7 per cent in 2023 but is expected to remain mostly stable over the next two years at 2.6 per cent in 2024 and 2.7 per cent in 2025. The contrast between the steady growth of GDP and the slowdown in merchandise trade volume is linked to inflationary pressures, which had a downward effect on consumption of trade-intensive goods, particularly in major traders," said the report.

The report added that the US dollar value of world merchandise trade fell 5 per cent in 2023 to USD 24.01 trillion but this decline was mostly offset by a strong increase in commercial services trade, which rose 9 per cent to USD 7.54 trillion. The decline in merchandise exports was partly due to falling prices for commodities, such as oil and gas. Meanwhile, commercial services trade was lifted by recovering international travel and surging digitally delivered services.

World trade has been remarkably resilient in recent years despite the presence of several major economic shocks, according to the report. By the end of 2023, merchandise trade volume was up 6.3 per cent compared to 2019. Commercial services also increased, noted the report, with annual USD values up 21 per cent between 2019 and 2023.

"In 2024 and 2025, inflation is expected to gradually abate, allowing real incomes to grow again in advanced economies, boosting consumption of manufactured goods. A recovery of demand for tradable goods in 2024 is already evident. This is related to an increase in household consumption linked to improved income prospects," said the report.