Global trade looking up in 2024, but risks remain, says WTO

Business a.m.

The World Trade Organization (WTO) has projected that global merchandise trade will increase by 2.6 per cent in 2024 and 3.3 percent in 2025, after declining by 1.2 per cent in 2023, as global inflation dips, countering the inflationary pressure seen in 2023, but warned of the risks of global trade fragmentation as a result of geopolitical tensions, rising protectionism, and the worsening Middle East crisis.

The Geneva-based trade body also noted that there are a number of risks to its 2024 forecast, with the most likely scenario being a decrease in global trade by 1.6 per cent. However, there is a wide range of possible outcomes, with the forecast ranging from a decrease of 1.6 per cent to an increase of 5.8 per cent.

In  a cautionary note regarding the ongoing conflict in the Red Sea region, the WTO warned that the conflict could have a significant impact on global trade. The organisation pointed out that before the pandemic in 2020, global trade had only declined in two years since the organisation was founded in 1995. These two years were 2009, when the global financial crisis led to a more than 12 percent decline in trade, and 2020, when the COVID-19 pandemic led to a five percent decline.

Commenting on the current state of the global trade landscape, Ralph Ossa, the WTO’s chief economist,noted  that while there is evidence of trade fragmentation, there is no indication of deglobalisation. He stated further that trade growth is continuing, albeit at a slower rate than in the 1990s. 

According to Ossa, the situation regarding geopolitical tensions and trade disruption needs to be closely monitored, as even a small escalation of the Middle East crisis could lead to significant spikes in oil prices. If energy prices were to rise significantly, it would have a significant impact on global trade, Ossa warned. He noted that the Suez Canal, a key maritime route for global trade, could also be affected by an escalation of the conflict, but the main concern is the risk of oil price spikes.

The WTO had previously estimated that a full decoupling of the world into geopolitical blocks could reduce global GDP by as much as five per cent. On the Red Sea, which accounts for 12 per cent of global trade, the WTO noted that shipping has slowed but not stopped, and that maritime freight rates are still relatively stable.