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Ph/DR: Dr Ngozi Okonjo Iweala, Director General of the WTO
Global merchandise trade is expected to gradually recover this year after experiencing a contraction in 2023, which resulted from the lingering effects of high energy prices and inflation, WTO economists said in a new forecast on 10 april. Global merchandise trade volume growth is expected to be 2.6% in 2024 and 3.3% in 2025, after falling to 1.2% in 2023. However, regional conflicts, geopolitical tensions and Economic policy uncertainty poses significant downside risks to forecasts.
In the latest “World Trade Outlook and Statistics” report, WTO economists note that inflationary pressures are expected to ease this year, allowing real incomes to grow again – particularly in advanced economies – which will boost consumption of manufactured products. A recovery in demand for tradable goods in 2024 is already evident, with indices of new export orders pointing to improving trade conditions at the start of the year.
WTO Director-General Ngozi Okonjo-Iweala said: “We are moving towards a recovery in global trade, through resilient supply chains and a strong multilateral trade framework – which are crucial to improving livelihoods and well-being. It is imperative to limit risks such as geopolitical unrest and trade fragmentation to maintain economic growth and stability. »
High energy prices and inflation continued to weigh heavily on demand for manufactured goods, leading to a 1.2% decline in global merchandise trade volume in 2023. The decline was larger in value terms, with merchandise exports down 5% to US$24.01 trillion. Developments in services trade were more positive, with exports of commercial services increasing by 9% to US$7.54 trillion, partly offsetting the decline in merchandise trade.
Import volumes declined in most regions, but especially in Europe, where they fell sharply. The main exceptions were large fuel-exporting economies, whose imports were supported by strong export earnings as energy prices remained high by historical standards. Global trade remained well above its pre-pandemic level throughout 2023. In the fourth quarter, its level was almost unchanged compared to the same period of 2022 (+0.1%). and had only increased slightly compared to the same period in 2021 (+0.5%).
The report further estimates that global GDP growth at market exchange rates will remain stable overall over the next two years, expected to reach 2.6% in 2024 and 2.7% in 2025, after falling to 2.7% in 2023 compared to 3.1% in 2022. The contrast between the steady growth of real GDP and the slowdown in the volume of merchandise trade in real terms is linked to inflationary pressures, which have reduced consumption of products commercially intensive, particularly in Europe and North America. (see chart)
Risks of deterioration
Looking ahead, the report notes that geopolitical tensions and policy uncertainty could limit the extent of trade recovery. The prices of food products and energy could once again experience sharp increases, linked to geopolitical events. The section of the report analyzing the Red Sea crisis indicates that while the economic impact of the disruptions in the Suez Canal arising from the Middle East conflict has so far been relatively limited, some sectors, such as those for automotive, fertilizer and retail products, have already been affected by delays and increases in freight costs.
The report further presents new data indicating that geopolitical tensions have had a marginal impact on trade patterns, but have not led to a sustained trend toward deglobalization. Bilateral trade between the United States and China, which reached a record level in 2022, recorded growth in 2023 that was 30% lower than that of these two countries’ trade with the rest of the world. Furthermore, for the whole of 2023, global trade in non-fuel intermediate goods – a useful indicator for the state of global value chains – declined by 6%.
Signs of fragmentation may also appear in trade in services: US imports of information and communications technology (ICT) services from North American trading partners (mainly Canada ) accounted for 15.7% of total ICT-related imports in 2018 and this figure increased to 23.0% in 2023, while the same US imports from Asia’s trading partners (mainly India) fell from 45.1% to 32.6%. Additionally, fragmentation in data flow policies along geopolitical lines could lead to a 1.8% decline in global trade in goods and services in real terms, and an estimated 1% decline in global GDP. of a forthcoming study by the Organization for Economic Co-operation and Development and the WTO.
Ralph Ossa, chief economist of the WTO, said: “Some governments have become more skeptical of the benefits of trade and have taken steps to relocate production and redirect trade to friendly countries. Trade resilience is also being tested by disruptions to two of the world’s major shipping routes: the Panama Canal, which is affected by freshwater shortages, and the diversion of Red Sea traffic. Amid prolonged disruption, geopolitical tensions and policy uncertainty, downside risks to the business outlook are significant. »
Regional economic outlook
If current projections are confirmed, Africa’s exports will grow faster than those of all other regions in 2024, namely by 5.3%; However, they are starting from a modest level, given that the continent’s exports remained weak after the COVID-19 pandemic. Growth expected for the CIS region[1] is slightly lower at 5.3%, also starting from a low level after the fall in exports following the war in Ukraine. North America (3.6%), the Middle East (3.5%) and Asia (3.4%) are all expected to see moderate export growth, while those of South America South are expected to grow more slowly (2.6%). European exports are expected to once again lag behind those of other regions, with growth of just 1.7%.
Strong growth in import volumes in Asia (5.6%) and Africa (4.4%) is expected to help support global demand for traded goods this year. However, all other regions are expected to post below-average import growth, including South America (2.7%), Middle East (1.2%), North America (1. 0%), Europe (0.1%) and the CIS region (-3.8%).
Merchandise exports from least developed countries (LDCs) are expected to increase by 2.7% in 2024, compared to 4.1% in 2023, before growth accelerates in 2025 (4.2%). At the same time, LDC imports are expected to increase by 6.0% this year and 6.8% next year, after contracting by 3.5% in 2023. (see table)
Trade in services
Global trade in commercial services grew by 9% in 2023 despite a decline in freight transport, thanks to the recovery in international trade and the rise in services delivered digitally. In 2024, sporting events scheduled to take place in Europe during the summer, as well as some countries’ relaxation of visa requirements, are expected to boost tourism and passenger transport.
Global exports of digitally delivered services skyrocketed in 2023, reaching US$4.25 trillion, an increase of 9.0% year-on-year, and accounted for 13.8% of global exports of goods and services . By 2023, the value of these services – traded across borders via computer networks and encompassing everything from professional and management services to music and video streaming, online gaming and distance learning – has exceeded pre-pandemic levels by more than 50%. As for Europe and Asia, which hold a global market share of 52.4% and 23.8% respectively, exports increased by 11% and 9%. Growth accelerated in Africa (13%) as well as South and Central America and the Caribbean (11%), above the global average. The two regions, which accounted for just 0.9% and 1.6% of global exports in 2023, are on track to benefit from trade in digitally delivered services.
The WTO has released a new set of trade in services data organized by mode of supply, as in the Organization’s General Agreement on Trade in Services (GATS). It provides valuable insights into how trade in services has evolved over the years, including the impact of digitalization and the COVID-19 pandemic.
This dataset, along with the latest estimates on trade in digitally supplied services and trade in services in general, can be viewed and downloaded from the Global Services Trade Data Platform. This new platform provides access to comprehensive WTO data relating to trade in services. It provides customizable visualizations and features to meet the diverse needs of information-seeking business negotiators, analysts, researchers and decision-makers.
