- Expect a gradual recovery in world merchandise trade this year and next year, according to the World Trade Organization
- Merchandise trade is seen growing by 2.6% this year and 3.3% next after falling by 1.2% in 2023
- Last year’s contraction was caused by lingering effects of high energy prices and inflation in advanced economies
- There remains a downside risk caused by regional conflicts, geopolitical tensions, and economic policy uncertainty
- Trade growth should remain stable in the next two years at 2.6% in 2024 and 2.7% in 2025
There will be a gradual recovery in world merchandise trade in 2024 and 2025, according to the World Trade Organization’s latest Global Trade Outlook and Statistics report.
The forecast follows a contraction in 2023 caused by lingering effects of high energy prices and inflation in advanced economies, notably Europe.
Merchandise trade is expected to grow by 2.6% this year and 3.3% next year after falling by 1.2% in 2023, said WTO chief economist Ralph Ossa in a blog.
There is, however, a downside risk caused by regional conflicts, geopolitical tensions, and economic policy uncertainty.
Ossa said that in value terms “merchandise trade fell five percent in 2023 to $24.01 trillion but the decline was mostly offset by a nine percent increase in commercial services trade” which hit around $7.54 trillion. Thus, goods and services trade only slipped by 2%.
Ossa pointed to “a particularly bright spot for services” in the worldwide exports of digitally delivered services. This reached $4.25 trillion last year, up 9% year-on-year, representing 13.8% of the global exports of goods and services.
The value of such services exceeded pre-pandemic levels by more than 50% last year.
Digitally delivered services means services delivered digitally across borders through computer networks, encompassing everything from professional services to streaming music and videos, inclusive of remote education according to the WTO report.
Most of the decline in merchandise trade volume between 2022 and 2023 was driven by Europe “which subtracted 1.7 percentage points from global import growth and reduced export growth by 1.0 percentage point.”
Looking ahead, Ossa said, “we expect all regions to make positive contributions to export and import growth in 2024.”
Specifically, he said Asia is seen to add some 1.3 percentage points to global export growth and 1.9 percentage points to global import growth this year.
Still, geopolitical tensions and regional conflicts may limit the extent of the rebound by causing more spikes in energy and food prices.
Ossa said it seems that geopolitical tensions are starting to affect trade patterns, with 30% less growth in bilateral trade between China and the US than in their trade with the rest of the world since 2018.
The trade environment is “clearly challenging,” said Ossa, but “we should not paint “too dark a picture of international trade.”
While global merchandise trade was flat last year, and the slight decline was relative to 2022, but it was up 6.3% compared to the pre-pandemic peak in the third quarter of 2019. It was also up 19.1% compared to 2015, proving the resilience of international trade.
Trade growth should remain stable in the next two years at 2.6% in 2024 and 2.7% in 2025, the WTO projection states.
“We believe that inflation was an important driver of this,” said Ossa, adding that “higher prices depressed real household incomes and eroded net revenues of firms in 2023, reducing demand for manufactured goods.”
“Inflationary pressures are expected to abate this year, allowing real incomes — particularly in advanced economies — to grow again,” Ossa concluded.
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