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Info Service on WTO and Trade Issues (Oct24/10) Geneva, 11 Oct (D. Ravi Kanth) — The projected outlook for global merchandise trade shows a modest increase of 2.3 percent in the first half of 2024, while indications are that there will be a further moderate expansion in the rest of the year, as well as in 2025, said World Trade Organization (WTO) economists on 10 October. Amid mounting headwinds, including the rapid fragmentation of the multilateral trading system and the creation of new supply chains based on geopolitical and geoeconomic considerations, the performance of global trade seemingly remains in the doldrums, according to several international surveys. In the October 2024 update of the “Global Trade Outlook and Statistics”, the WTO economists said “the rebound comes on the heels of a -1.1% slump in 2023 driven by high inflation and rising interest rates”, while “world real GDP growth at market exchange rates is expected to remain steady at 2.7% in 2024 and 2025.” The updated Outlook issued by the WTO suggests that “inflation by the middle of 2024 had fallen sufficiently to allow central banks to cut interest rates.” It maintained that lower inflation should raise real household incomes and boost consumer spending, while lower interest rates should raise investment spending by firms. While there is little assessment of the impact of the fragmentation of the multilateral trading system on overall global trade, the WTO economists appear to have strayed into the realm of global macroeconomic issues. The WTO economists said that “diverging monetary policies among major economies could lead to financial volatility and shifts in capital flows as central banks bring down interest rates,” adding that this “might make debt servicing more challenging, particularly for poorer economies.” According to the WTO economists, “the services new export orders index rose to 51.7 in August, its highest level since July 2023. The services Purchasing Managers’ Index remained firmly in expansion territory at 52.9 as of August, although it did turn down in September.” In her remarks on the latest update on the performance of global trade, the WTO Director-General, Ms Ngozi Okonjo-Iweala, said: “We are expecting a gradual recovery in global trade for 2024, but we remain vigilant of potential setbacks, particularly the potential escalation of regional conflicts like those in the Middle East.” “The impact could be most severe for the countries directly involved, but they may also indirectly affect global energy costs and shipping routes. Beyond the economic implications, we are deeply concerned about the humanitarian consequences for those affected by these conflicts,” she added. She continued: “It is imperative that we continue to work collectively to ensure global economic stability and sustained growth, as these are fundamental to enhancing the welfare of people worldwide. In the past three decades since the WTO was established, per capita incomes in low- and middle-income economies have nearly tripled. We must continue our efforts to foster inclusive global trade.” REGIONAL TRADE TRENDS “The latest forecasts for world trade in 2024 and 2025 only show modest revisions since the last Global Trade Outlook and Statistics report in April, but these projections do not capture some important changes in the regional composition of trade,” WTO Chief Economist Ralph Ossa said. “Historical trade volume data have been revised substantially, including downward revisions to European exports and imports back to 2020. There have also been notable changes in GDP forecasts by region, including a 0.4 percentage point upgrade to North America’s growth, which could influence trade flows in other regions as well,” he added. According to the Outlook, “North American trade is largely driven by the United States although Mexico stands out with stronger import growth compared to the region as a whole. Mexican imports are rebounding after a contraction in 2023, underscoring the country’s growing role as a “connecting” economy in trade.” Europe is now expected to post a decline of 1.4% in export volumes in 2024, and its imports will meanwhile decrease by 2.3%, largely due to a contraction in Europe’s largest economy, Germany. “A slump in EU exports of automotive products is worrying due to the potential impact on the sector’s extensive supply chains,” the WTO economists noted. Asia’s export volumes will grow faster than those of any other region this year, rising by as much as 7.4% in 2024, the Outlook said. “The region saw a strong export rebound in the first half of the year driven by key manufacturing economies such as China, Singapore and the Republic of Korea,” it suggested. Asian imports apparently showed divergent trends: while China’s growth remains modest, other economies such as Singapore, Malaysia, India and Viet Nam are surging. “This shift suggests their emerging role as “connecting” economies, trading across geopolitical blocs, thereby potentially mitigating the risk of fragmentation,” the Outlook suggested. South America is rebounding in 2024, recovering from weaknesses in both exports and imports experienced in 2023. Africa’s export growth is in line with the global trend, the Outlook suggested. “It has been revised downward from the April forecast, driven by an overall revision of Africa’s trade statistics, and a greater-than-expected weakening in Europe’s imports, Africa’s main trade partner.” In April, WTO economists forecasted a contraction in the CIS region’s imports for 2024, but now it is projected to post 1.1% growth, driven by stronger-than-expected GDP expansion. The Outlook suggested that “merchandise exports of least-developed countries (LDCs) are projected to increase by 1.8% in 2024, marking a slowdown from the 4.6% growth recorded in 2023.”
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