Global trade volumes are expected to get back to the growth phase this year as consumption demand picks up in advanced economies after a tough 2023 which saw a contraction in cross border shipments, according to the World Trade Outlook of the World Trade Organisation (WTO) on Wednesday.
The WTO, however, lowered its forecast for growth in 2024 of world merchandise trade volumes to 2.6% from 3.3% it had projected in October last year as the impact of factors responsible for contraction in 2023 are still being felt.
In October the forecast was for 0.8% trade growth in 2023 but the shipments actually declined 1.2% as high energy prices and inflation continued to weigh heavily on demand for manufactured goods.
The decline in world demand was also seen in India’s exports which fell 4.8% to $ 431.4 billion, as per the commerce ministry data.
According to the WTO inflationary pressures are expected to abate, allowing real incomes to grow again — particularly in advanced economies — thus providing a boost to the consumption of manufactured goods in 2024.
“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 WTO report said For 2025 the global trade regulating body has forecast 3.3% growth. If the forecast is realised, Asia will make a bigger contribution to trade volume growth in 2024 and 2025, it added.
In 2023 import demand fell sharply in Europe, declined in North America, remained flat in Asia, and increased in major fuel-exporting economies.
In value terms, world trade last year fell 5% in 2023 to $ 24.01 trillion but this decline was mostly offset by a strong increase in commercial services trade, which rose 9% to $ 7.54 trillion. 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.
“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,” the trade outlook said.
While 20024 looks promising, 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,” the WTO said.
Other development that could threaten the positive outlook for 2024 and 2025 is supply chain fragmentation signs of which are starting to emerge. 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%.