WTO forecasts gradual trade recovery in 2024, 2025

Global goods trade is on course for modest growth throughout 2024 and 2025, despite risks emanating from the conflict in the Middle East, the World Trade Organisation forecast Thursday.

“We are expecting a gradual recovery in global trade for 2024, but we remain vigilant of potential setbacks — particularly the potential escalation of regional conflicts like those in the Middle East,” WTO director-general Ngozi Okonjo-Iweala said in a statement.

“The impact could be most severe for the countries directly involved, but they may also indirectly affect global energy costs and shipping routes.”

Global goods trade had slumped by 1.1 per cent in 2023, depressed by high inflation and rising interest rates.

In its updated global trade outlook, the WTO revised its forecast for world merchandise trade growth in 2024 to 2.7 per cent — slightly up from the April estimate of 2.6 per cent.

Demand for traded goods was stronger than foreseen in Asia and weaker than expected in Europe, it said.

The WTO lowered its 2025 forecast from 3.3 per cent to three per cent.

WTO chief economist Ralph Ossa told AFP that while there were “risks everywhere” for international trade, “the biggest one would be the geopolitical risk” from conflict in the Middle East.

“If, for example, the oil price rises dramatically, this would of course affect the economy and trade,” he said.

However, “it seems that at the moment the markets can’t quite decide if they should be concerned about the supply side risks coming from the Middle East, or what they should think about the demand side coming from China”.

– Germany conspicuous weak point –
Asia’s export volumes are set to grow faster than any other region this year, rising by as much as 7.4 per cent, driven by China, Singapore and South Korea, with Japanese exports stagnant.

On the import side, Chinese import growth remains moderate, while Singapore, Malaysia and other Asian economies are showing stronger growth.

Meanwhile, Europe is now expected to post a decline of 1.4 per cent in export volumes in 2024. Imports are forecast to decrease by 2.3 per cent.

“We see Europe weaker than we expected and Asia stronger than we expected, with Europe continuing to be a drag on export and import growth, and Asia continuing to be a driver, particularly of exports,” said Ossa.

For Europe, “a big part of the story is Germany”, he said.

Ossa cited lower car and chemical exports, particularly in organic chemicals and those used in vaccine production.

Germany’s crucial manufacturing sector has been hit hard by higher energy costs in the wake of Russia’s war in Ukraine and cooling demand from abroad, contributing to a wider downturn.

– Mexico, Vietnam ‘connector’ boost –
The WTO outlook highlighted the rising importance of so-called “connector countries” in global supply chains and trade, particularly Mexico and Vietnam, followed by India.

While the direct bilateral trade relationship between China and the United States has “really suffered”, much trade now seems to be being routed via such countries, Ossa explained.

The WTO hopes the normalisation of inflation and interest rates will bolster international trade.

“As the impact of inflation recedes, we should expect to see incomes recovering and consumption of all kinds of goods rising, including imports,” WTO senior economist Coleman Nee told AFP.

World real GDP growth at market exchange rates is expected to remain steady at 2.7 per cent in 2023, 2024 and 2025.

The fastest-growing region this year is likely to be Asia, where output is expected to climb to 4.0 per cent, while the slowest-growing region is likely to be Europe at 1.1 per cent.