WTO projects rebound in trade growth to 3.2% in 2024, but downside risks remain
The World Trade Organisation’s (WTO) recent projection that trade growth is expected to rebound to 3.2% in 2024 comes as a much-needed respite in a time of lingering challenges for global trade. The announcement follows the organisation’s release of its “Global Trade Outlook and Statistics” report, which revealed that global merchandise trade is expected to grow by 1.7% this year after seeing 2.7% growth in 2022, which was pulled down by a sharp slump in the fourth quarter.
The WTO’s forecasted figures for both trade and output growth for the next few years are lower than the average for the past 12 years, with projections of 2.6% and 2.7%, respectively. The report estimates real global GDP growth at market exchange rates of 2.4% for 2023. The global trade outlook is, therefore, marked by persisting challenges, including the impact of geopolitical tensions, the prolonged effects of the COVID-19 pandemic, stubbornly high inflation, tighter monetary policy, and financial market uncertainty.
Despite the challenges, WTO Director-General Ngozi Okonjo-Iweala stressed the resilience of trade as a force for the global economy, pointing out that trade continues to be a force for resilience. She emphasized that governments need to avoid trade fragmentation and refrain from introducing obstacles to trade, underscoring the importance of investing in multilateral cooperation on trade, which would bolster economic growth and people’s living standards over the long term.
Meanwhile, WTO’s Chief Economist Ralph Ossa warned that the lingering effects of the COVID-19 pandemic and the rising geopolitical tensions were the main factors impacting trade and output in 2022, adding that they are likely to continue in 2023. Ossa also pointed out that interest rate hikes in advanced economies have revealed weaknesses in banking systems that could lead to wider financial instability if left unchecked. Therefore, governments and regulators need to be alert to these and other financial risks in the coming months.
However, there are some reasons for cautious optimism on the trade front. For example, the 1.7% growth projection for global trade growth in 2023 represents a slight upgrade from the previous estimate of 1.0% from last October. A crucial factor here is the relaxation of COVID-19 pandemic controls in China, which is expected to unleash pent-up consumer demand in the country and boost international trade.
Another positive development is the ability of vulnerable economies to compensate for essential food supplies cut off by the war in Ukraine by finding alternative products and suppliers. This ability is documented in a follow-up study released by the WTO last month, which suggests that the global markets remained broadly open, despite the war in Ukraine and the more pessimistic trade growth scenario.
The WTO’s report underlines the importance of ongoing efforts towards greater multilateral cooperation on trade. It points to the need for continued vigilance to avoid the fragmentation of global trade and the introduction of trade obstacles, which could stifle economic growth and hurt people’s living standards. While the challenges facing global trade are not negligible, the WTO’s forecasted figures offer a glimmer of hope and a reminder of the resilience of global trade in the face of adversity.
