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Business News/ Economy / WTO expects gradual recovery in global trade in 2024
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WTO expects gradual recovery in global trade in 2024

As economic pressures ease and incomes rise, the volume of global merchandise trade will increase by 2.6% in 2024 and by 3.3% in 2025

During 2023, global trade declined 1.2% amid geopolitical and economic turmoil. (Image: Pixabay)Premium
During 2023, global trade declined 1.2% amid geopolitical and economic turmoil. (Image: Pixabay)

New Delhi: Global goods and merchandise trade will recover gradually during 2024, following a downturn in 2023 due to high energy prices and inflation, economists at the World Trade Organization (WTO) said on Wednesday.

As economic pressures ease and incomes rise, the volume of global merchandise trade will increase by 2.6% in 2024 and 3.3% in 2025, the WTO said in its Global Trade Outlook and Statistics report.

During 2023, global trade declined 1.2% amid geopolitical and economic turmoil, after registering a 3% growth in 2022.

In value terms, the decline in merchandise exports was more pronounced in 2023, declining 5% to $24.01 trillion.

However, commercial services exports increased by 9% to $7.54 trillion during 2023, partially offsetting the decline in goods trade.

Regional conflicts, geopolitical tensions and economic policy uncertainty pose substantial downside risks to the forecast, the report added.

The contrast between the steady GDP growth and the slowdown in merchandise trade volume is attributed to inflationary pressures.

These pressures have led to a decrease in the consumption of trade-intensive goods, especially in major trading countries.

“We are making progress towards global trade recovery, thanks to resilient supply chains and a solid multilateral trading framework — which are vital for improving livelihoods and welfare," WTO's director-general Ngozi Okonjo-Iweala said in the report.

"We must mitigate risks like geopolitical strife and trade fragmentation to maintain economic growth and stability," she added.

According to the WTO forecast, inflation is expected to ease in 2024 and 2025, which would result in an increase in real incomes in advanced economies.

This rise in real income is anticipated to drive higher demand for manufactured goods. Already, there are signs of this recovery in the demand for tradable goods, a trend that is closely linked to the improved income prospects for households.

However, the report warned that geopolitical tensions and policy uncertainties could limit the trade rebound and there is a risk of food and energy prices spiking due to geopolitical events.

On the impact of the ongoing Red Sea crisis, the WTO report noted that while the economic impact of the Suez Canal disruptions from the Middle East conflict has been limited, sectors like automotive products, fertilizers, and retail have seen the effects of delays and higher freight costs.

World trade has shown remarkable resilience in recent years, despite facing several major economic shocks. By the end of 2023, the volume of merchandise trade had increased by 6.3% compared to 2019. Similarly, the value of commercial services also saw a significant rise, with annual values up by 21% between 2019 and 2023.

“The forecast for trade growth faces risks primarily from geopolitical tensions and policy uncertainties," the WTO report said.

"The conflict in the Middle East has caused disruptions in sea shipments between Europe and Asia, and similar tensions elsewhere could lead to further trade fragmentation," it added.

WTO's economists have warned that rising protectionism poses a significant threat to the anticipated trade recovery in 2024 and 2025.

The WTO, an international organization with 164 member countries, aims to facilitate smooth, predictable, and liberal global trade, ensuring a fair playing field for all members.

According to the WTO-UNCTAD data, India’s goods exports to the world reached $432 billion, while imports amounted to $673 billion in 2023, resulting in a trade deficit of $241 billion.

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Published: 10 Apr 2024, 04:02 PM IST
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