Rebound in global trade seen this year as inflation gradually abates

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Global merchandise trade is expected to pick up this year following a contraction in 2023, as inflationary pressures ease and as real household incomes improve, according to the World Trade Organization’s (WTO) latest forecast.

“By symmetry, lower inflation in 2024 is expected to lead to a rebound in consumption of manufactured goods, which should boost merchandise trade volume growth in 2024 and 2025,” said the WTO’s Global Trade Outlook and Statistics report.

It said a recovery of demand for tradable goods in 2024 is already evident, which is related to an increase in household consumption linked to improved income prospects.

The WTO report said world merchandise trade volume is expected to grow 2.6 percent in 2024 and 3.3 percent in 2025 as demand for traded goods rebounds.

Trade volume was down 1.2 percent last year due to the lingering effects of high energy prices and inflation, after recording 3 percent expansion in 2022 despite the outbreak of war in Ukraine.

If the WTO’s trade forecast for 2024 is realized, Asia will contribute more to merchandise trade growth than it did over the last two years.

The report said the region is expected to add around 1.3 percentage points to the projected 2.9 percent growth in world exports this year, or around 45 percent. On the imports side, it should add 1.9 percentage points to the anticipated 2.3 percent growth in world imports, or around 81 percent.

Other regions should make smaller contributions to export and import growth, but all are expected to be positive, it said.

“Strong import volume growth of 5.6% in Asia and 4.4% in Africa should help prop up global demand for traded goods this year,” it added.

The WTO report further said risks to the forecast are on the downside due to current geopolitical tensions and policy uncertainty.

“Conflict in the Middle East has diverted sea shipments between Europe and Asia while tensions elsewhere could lead to trade fragmentation. Rising protectionism is another risk that could undermine the recovery of trade in 2024 and 2025,” it said.

The report said the adverse trade environment that prevailed in 2023 is expected to ameliorate somewhat this year and next, providing a boost to goods trade in 2024 and 2025.

“However, geopolitical tensions and policy uncertainty could limit the scope of any trade rebound. While export growth should improve in many economies as external demand for goods picks up, food and energy prices could again be subject to price spikes linked to geopolitical events,” it added.

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