World trade in goods will see modest growth in 2024 and 2025, despite risks from conflict in the Middle East, forecast World Trade Organization (WTO) this Thursday 10th.
“We expect a gradual recovery in world trade in 2024, but we remain vigilant in the face of possible setbacks, especially the possible escalation of regional conflicts such as those in Middle EastWTO Director Ngozi Okonjo-Iweala said in a statement.
“The impact could be especially severe for the countries directly involved, but could also indirectly affect the global cost of energy and shipping routes,” he added.
World trade in goods fell 1.1% in 2023, hit by high inflation and rising interest rates.
In its updated global data forecast, the WTO revised its forecast for world merchandise trade growth in 2024 to 2.7%, slightly above the 2.6% predicted in April.
Demand for goods was higher than expected in Asia and lower than expected in Europe, he said.
The WTO downgraded its forecast for 2025 from 3.3% to 3%.
WTO chief economist Ralph Ossa told AFP what although there is “risk everywhere” for international trade, “the biggest would be the geopolitical risk” due to the conflict in the Middle East.
“If, for example, the prices of oil rise radically, this will certainly affect the economy and trade”these.
However, “it appears that, at the moment, markets cannot decide whether they should worry about supply risks from the Middle East or what they should think about demand from China.”
Germany’s weak point
Asian exports are expected to grow by up to 7.4% this year, driven by ChinaSingapore and South Korea, while Japanese exports are at a standstill.
On the demand side, the increase in Chinese imports remains moderate, with a stronger increase in other Asian economies such as Singapore and Malaysia.
However, Europe projects a 1.4% drop in its export volume in 2024. Imports project a 2.3% drop.
“We see Europe weaker than expected and Asia stronger than expected”Bones said.
In Europe, much of the ballast comes from Germany, he said.
Ossa cited low German exports of vehicles and chemicals, especially organic chemicals.
The German manufacturing sector was affected by rising energy costs following the Russian invasion of Ukraine and low external demand, worsening its decline.
Mexico and Vietnam, the ‘connectors’
The WTO forecast highlighted the growing importance of so-called “connector countries” in global supply chains and trade, especially Mexico and Vietnam, followed by India.
These countries have become the connecting route for exports at a time when the trade relationship between China and the United States “has really been damaged,” Ossa said.
The WTO hopes that the normalization of inflation and interest rates will boost international trade.
“As the inflationary impact recedes, we should expect a recovery in income and consumption of all types of goods, including imports,” said WTO economist Coleman Nee.
World real GDP growth at market exchange rates is expected to remain stable at 2.7% in 2023, 2024 and 2025.
The fastest growing region this year is expected to be Asia at 4%, while Europe will have the slowest growth at 1.1%.
