(Geneva) The WTO forecasts a recovery in world trade this year, but conflicts, geopolitical tensions and economic policy uncertainty pose significant downside risks to the forecasts, it said on Wednesday.
Volume growth (adjusted for inflation) in global merchandise trade is expected to be 2.6% in 2024 (compared to a forecast of 3.3% in October) and 3.3% in 2025, after falling l last year, according to annual forecasts from the World Trade Organization.
“We are moving towards a recovery in global trade, thanks to resilient supply chains and a strong multilateral trade framework,” commented WTO Director-General Ngozi Okonjo-Iweala.
“It is imperative to limit risks such as geopolitical unrest and trade fragmentation to maintain economic growth and stability,” she warned.
The report further estimates that global GDP growth will remain stable overall over the next two years, expected to reach 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, leading to a 1.2% decline in global merchandise trade volume, as the WTO expected +0.8% in October.
“The downward revision is mainly due to Europe’s poorer 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 global trade in services, but points out that it will increase by 9% in 2023, and the organization expects that sporting events due to take place in Europe during the summer (Olympic Games and Euro-2024) stimulate tourism and passenger transport.
Inflationary pressures are expected to ease this year, allowing real incomes to grow again – particularly in advanced economies – which will boost 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 increases 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, certain sectors, such as automotive products, fertilizers and trade retail, have already been affected by delays and increases in freight costs.
“We are still in a period where trade is relatively resilient” and “we absolutely do not see deglobalization”, but there are signs of “fragmentation” of global trade, observed Mr. Ossa.
Protectionism
Thus, he underlined, bilateral trade between the United States and China, which had reached a record level in 2022, recorded in 2023 a growth of 30% lower than that of the trade of these two countries with the rest of the world.
Signs of fragmentation are also appearing in trade in services: United States imports of information and communication technology services from Canada increased in 2023 while those from Asia (mainly from ‘India) have declined.
The WTO therefore warns against the various desires that certain countries or policies may have 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 re-evaluating their trade policy choices and, of course, that will have consequences for the way international trade evolves,” Ossa explained.
Just “the fact of not knowing how some of these political choices are made and this uncertainty in terms of trade policy are already in themselves a brake on international trade,” he said, pointing the finger at the dozens of elections taking place this year around the world, including in the United States.