The World Trade Organisation (WTO) has projected an increase in world merchandise trade volume, with a growth of 2.6 per cent in 2024 and 3.3 per cent in 2025. This comes after a decline of -1.2 per cent in 2023. The organisation stated that inflation is expected to ease in the coming years, allowing for real incomes to grow in advanced economies, leading to an increase in the consumption of manufactured goods. However, the WTO also highlighted risks to this forecast due to geopolitical tensions and policy uncertainty, which could lead to trade fragmentation and rising protectionism.
Import demand in real terms was weak in 2023 in most regions, particularly in Europe, North America, and Asia. The Middle East and the Commonwealth of Independent States (CIS) region were exceptions, experiencing a surge in imports. World real GDP growth slowed in 2023 but is expected to stabilize at 2.6 per cent in 2024 and 2.7 per cent in 2025. The report attributed this slowdown to inflationary pressures impacting the consumption of trade-intensive goods in major trading nations.
The US dollar value of world merchandise trade fell in 2023, but this decline was offset by a strong increase in commercial services trade, driven by recovering international travel and digitally delivered services. The decline in merchandise exports was partly due to falling commodity prices, such as oil and gas. Despite economic shocks, world trade has been resilient in recent years, with merchandise trade volume up 6.3 per cent compared to 2019 by the end of 2023. Commercial services also saw an increase, with annual values up 21 per cent between 2019 and 2023.
In the coming years, the WTO expects inflation to decrease, allowing for a growth in real incomes in advanced economies and an increase in the consumption of manufactured goods. This projected recovery of demand for tradable goods is already evident in household consumption linked to improved income prospects. However, the outlook is clouded by risks such as geopolitical tensions and rising protectionism, which could potentially hinder the recovery of international trade in 2024 and 2025. The balance between steady GDP growth and a slowdown in merchandise trade volume is closely tied to inflationary pressures impacting the consumption of trade-intensive goods in major trading nations.
In conclusion, the WTO’s forecast for world merchandise trade volume indicates a positive outlook for 2024 and 2025, with expectations of growth driven by easing inflation and increased real incomes in advanced economies. However, risks such as geopolitical tensions and rising protectionism loom large, posing potential threats to the recovery of international trade. Despite challenges, world trade has shown resilience in recent years, with strong growth in both merchandise and commercial services trade. The coming years will test the ability of global markets to navigate uncertainties and maintain growth in the face of evolving economic and geopolitical landscapes.
