World Trade Organization predicts rise in global trade in 2024
Introduction
The World Trade Organization (WTO) has released its global trade forecasts for 2024 and its really looking positive. In the midst of all the challenges that has affected the growth of international trade around the world in recent years, the WTO has predicted that there will be a significant upward movement in global trade in 2024.
After considering a lot of factors that affects global trades, the economists forsee a 2024 where global trade volumes would rise by a percentage that represents substantial growth especially when looked at in the light of recent developments few years ago.
In this document, we want to analyze what this forecast means for everyone and some factors that will contribute to the growth of international trade.
Trade Growth in 2024
So lets start by looking at the statement directly from WTO economists and the Director General:
The volume of world merchandise trade should increase by 2.6% in 2024 and 3.3% in 2025 after falling 1.2% in 2023. 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. It's imperative that we mitigate risks like geopolitical strife and trade fragmentation to maintain economic growth and stability. source
A lot was positive about the WTO statements above as global trade is predicted to grow more in 2024 than the stat in 2023. However, the report noted two components that had a very negative effect on the volume of trade in 2023. The cost of energy and inflation.
Down into 2024, the cost of energy has really been a big challenge to further growth of international trade. Organizations that manufacture goods paid higher for energy consumption. As a result, the price of finished goods also went a little higher than it should be. The WTO hopes that through international trade polices and bilateral agreements between energy producers and countries that buy from them, the price of energy might come down to a more reasonable rate.
Inflation was another big challenge in 2023 which its hoped that it will improve in 2024. The general rise in prices of commodities in the market reduced the volume of trade that happened in 2023. It is really understandable economically. As the price of goods were hiked, the purchasing power of each currency lowered. Hence, people were able to purchase less with the same amount of money.
Supply chains would play an important role in the expected increase in volume of trade in 2024. The WTO expects significant output from the supply chains, given the vast resources that was made available to that sector through policies implemented in late 2023.
Although there is a lot of positivity with the prediction for 2024, the WTO warns that some factors could become bottleneck for this predicted trade growth. Those factors would need to be addressed promptly in order to have a better trades volume in 2024 and 2025. Below is the forecasted GDP levels for 2024 and 2025:
global GDP growth at market exchange rates will remain mostly stable over the next two years at 2.6% in 2024 and 2.7% in 2025, after slowing to 2.7% in 2023 from 3.1% in 2022 source
Regional conflicts and government policies
While the WTO was really optimistic about the growth of global trade in 2024, it warns of some factors that could make it difficult to achieve those expectations. One of them is geopolitical disagreements. Such tensions between governments or different groups could really disrupt the free flow of goods and thus slow down trade. There are a few of such tensions right now, but the most prominent is the one between Israel and militia groups in Gaza.
Some Militia groups have been targeting merchant ships delivering goods through the Suez Canal. As a result of this situation, many shipping companies are trying to avoid that route. The economic implications of doing so would be huge on global trade if nothing is done to resolve the conflict. A ship has been sunk as a result of the attacks and some maritime workers have lost their lives or got injured.
The WTO noted that for the meantime, the effect of disruption of the Suez Canal has been very well managed and its full effect has not been felt. But if situations does not improve over time, such important shipping channel being made impassable will have its toll significantly felt in global trade.
Another important component that should be closely watched is government policies on trade. Some countries have made unfavorable government policies. Such policies might limit the economic output or volume of production in that country. If the number of countries having this issue becomes many, then it limits the volume of trade globally.
So economists and law-makers in every country need to review trade policies and ensure that only policies that promote productivity and increases factors of production are enacted. In this way, local laws should not be allowed to stand in the way of global trade.
Conclusion
It looks like a positive prediction from the WTO on trade for 2024 and 2025. It remains to be seen though how it will play out. Governments and all stakeholders can work together and improve the trade outlook for all this 2024 and subsequent years.
If you want to read more about this, check out the resource link below:
Note: Thumbnail is mine.
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