Global goods trade is expected to pick up gradually in 2024 following last year’s contraction that was driven by the lingering effects of high energy prices and inflation, WTO economists have said in a new forecast. The volume of world merchandise trade should increase by 2.6% in 2024 and 3.3% in 2025 after falling 1.2% in 2023. However, regional conflicts, geopolitical tensions and economic policy uncertainty pose substantial downside risks to the forecast.
THE REPORT: In the latest Global Trade Outlook and Statistics report, WTO economists noted that inflationary pressures are expected to abate this year, allowing real incomes to grow again—particularly in advanced economies—thus providing a boost to the consumption of manufactured goods. A recovery of demand for tradable goods in 2024 is already evident, with indices of new export orders pointing to improving conditions for trade at the start of the year.
THE TRENDS: High energy prices and inflation continued to weigh heavily on demand for manufactured goods, resulting in a 1.2% decline in world merchandise trade volume for 2023.
- The decline was larger in value terms, with merchandise exports down 5% to $24.01 trillion. Trade developments on the services side were more upbeat, with commercial services exports up 9% to $7.54 trillion, partly offsetting the decline in goods trade.
- Import volumes were down in most regions but especially in Europe, where they fell sharply. The main exceptions were large fuel-exporting economies, whose imports were sustained by strong export revenues as energy prices remained high by historical standards.
- World trade remained well above its pre-pandemic level throughout 2023. By the fourth quarter it was nearly unchanged compared to the same period in the 2022 (+0.1%) and had only risen slightly compared to the same period in 2021 (+0.5%).
- Global GDP growth at market exchange rates will remain mostly stable over the next two years at 2.6% in 2024 and 2.7% in 2025, after slowing to 2.7% in 2023 from 3.1% in 2022.
THE RISKS: The report warns that geopolitical tensions and policy uncertainty could limit the extent of the trade rebound.
- The report's special analytical section on the Red Sea crisis notes that while the economic impact of the Suez Canal disruptions stemming from the Middle East conflict has so far been relatively limited, some sectors, such as automotive products, fertilisers and retail, have already been affected by delays and freight costs hikes.
NEW DATA: The report has also presented new data indicating that geopolitical tensions have affected trade patterns marginally but have not triggered a sustained trend toward de-globalisation.
- Bilateral trade between the United States and China, which reached a record high in 2022, grew 30% less in 2023 than did their trade with the rest of the world. Moreover, for the whole of 2023, global trade in non-fuel intermediate goods—which provides a useful gauge of the status of global value chains—was down 6%.
- Signs of fragmentation may also be emerging in services trade: US imports of information, computer, and telecommunications (ICT) services from North American trading partners (mostly Canada) increased from 15.7% of total ICT imports in 2018 to 23.0% in 2023 while US imports of the same from Asian trading partners (mostly India) fell from 45.1% to 32.6%.
REGIONAL TRADE OUTLOOK: If current projections hold, Africa's exports will grow faster than those of any other region in 2024, up 5.3%; this however is from a low base, since the continent's exports remained depressed after the COVID-19 pandemic.
- The CIS region's expected growth is just slightly below 5.3%, also from a reduced base after the region's exports plunged following the war in Ukraine.
- North America (3.6%), the Middle East (3.5%) and Asia (3.4%) should all see moderate export growth, while South America is expected to grow more slowly, at 2.6%. European exports are once again expected to lag behind those of other regions, with growth of just 1.7%.
- Strong import volume growth of 5.6% in Asia and 4.4% in Africa should help prop up global demand for traded goods this year. However, all other regions are expected to see below average import growth, including South America (2.7%), the Middle East (1.2%), North America (1.0%), Europe (0.1%) and the CIS region (-3.8%).
- Merchandise exports of least-developed countries (LDCs) are forecast to grow 2.7% in 2024, down from 4.1% in 2023, before growth accelerates to 4.2% in 2025. Meanwhile, imports by LDCs should grow 6.0% this year and 6.8% next year following a 3.5% contraction in 2023.
TRADE IN SERVICES: World commercial services trade grew 9% in 2023 despite a decline in freight transport, thanks to recovering international travel and surging digitally delivered services.
- Global exports of digitally delivered services soared to $4.25 trillion in 2023, up 9.0% year-on-year, and accounted for 13.8% of world exports of goods and services.
- In 2023, the value of these services--traded over borders through computer networks and encompassing everything from professional and management services to streaming of music and videos, online gaming, and remote education--surpassed pre-pandemic levels by over 50%.
- In Europe and Asia, which hold a global market share of 52.4% and 23.8% respectively, exports rose by 11% and 9%. Growth accelerated in Africa (13%) and in South and Central America and the Caribbean (11%), exceeding the global average. The two regions, which formed only 0.9% and 1.6% of global exports in 2023, are on the path to take advantage of digitally delivered services trade.
WHAT THEY SAID:
We are making progress towards global trade recovery, thanks to resilient supply chains and a solid multilateral trading framework— which are vital for improving livelihoods and welfare. It's imperative that we mitigate risks like geopolitical strife and trade fragmentation to maintain economic growth and stability.
— Ngozi Okonjo-Iweala
Director-General
World Trade Organization
Some governments have become more sceptical about the benefits of trade and have taken steps aimed at re-shoring production and shifting trade towards friendly nations. The resilience of trade is also being tested by disruptions on two of the world's main shipping routes: the Panama Canal, which is affected by freshwater shortages, and the diversion of traffic away from the Red Sea. Under these conditions of sustained disruptions, geopolitical tensions, and policy uncertainty, risks to the trade outlook are tilted to the downside.
— Ralph Ossa
Chief Economist
World Trade Organization
