The World Trade Organisation (WTO) has revised its 2023 outlook for global trade, lowering expectations due to a lack of expected rebound in trade volumes from the previous year’s slump.
The WTO now projects world merchandise trade volumes to grow by just 0.8 per cent in 2023, less than half the 1.7 per cent annual increase projected in April.
According to the WTO’s figures, a broad-based slowdown in trade volumes has affected a wide range of goods, including iron and steel, office and telecom equipment, textiles, and clothing. However, passenger vehicles have seen a surge in sales this year.
Overall, all global regions except Asia are expected to experience lower trade growth in 2023 than in 2022. Asia’s trade volumes are projected to grow by 0.6 per cent, compared to 0.4 per cent in 2022, marking the second consecutive year that the region’s trade growth has been below the global average.
The current flagging trade environment has impacted Asia-focused banks, with several major lenders citing flat or declining trade finance revenues due to slower goods trade in the region.
Looking ahead, the WTO projects a 3.3 per cent increase in trade volumes in 2024, supported by steady GDP growth, easing inflation, and moderating interest rate hikes.
Emerging Supply Chain Fragmentation
However, the WTO noted that emerging supply chain fragmentation could threaten this positive outlook, a sentiment echoed by Standard Chartered Global Research.
Merchandise trade volume dipped 0.5% year-on-year in January-June, but a “modest pickup” is expected in the second half of this year, the WTO said. And it sees annual goods trade growth jumping to 3.2% in 2024 – a forecast practically unchanged from its previous projection of 3.3%.
However, growth could be higher than this if inflation comes down quickly, the WTO said. On the other hand, a sharper-than-expected slowdown in China or a resurgence in inflation in advanced economies could drag on goods trade in 2024.
Signs of a trade recovery are emerging for 2024, according to global shipping company Maersk. US and European consumers are driving the bounceback and emerging markets are looking resilient, notably India, Latin America and Africa, Maersk CEO Vincent Clerc indicated.
While the WTO has taken steps to restore its relevance, Standard Chartered economists observed that the push towards trade liberalisation is largely taking place outside the WTO structure, through bilateral and regional free trade agreements that reinforce global trade fragmentation into specific corridors and regional pacts. The bank’s economists made this observation.
The WTO’s Chief Economist, Ralph Ossa, in a comment, noted that some signs of trade fragmentation linked to geopolitical tensions can be seen in the data.
That notwithstanding, Ralph Ossa stressed that broad-based deglobalisation has not yet occurred, and that goods continue to be produced through complex supply chains.
Ralph Ossa noted that the extent of these chains may have plateaued in the short term, but that positive export and import volume growth should resume in 2024. Despite this, he emphasizes the need to remain alert to changes in global trade patterns.
To improve the outlook for trade, Ngozi Okonjo-Iweala, WTO Director-General encouraged WTO members to seize the opportunity to strengthen the global trading framework by avoiding protectionism and promoting a more resilient and inclusive global economy.
Okonjo-Iweala added that for the world’s poorest countries, recovery will be impossible without a multilateral trading system that is stable, open, predictable, rules-based, and fair.
The WTO’s “Global Trade Outlook and Statistics” analyses recent global trade developments up to the fourth quarter of 2022 and presents the organization’s forecasts for world trade in 2023 and 2024. Breakdowns of merchandise and commercial services trade by sector and region are provided, together with details on leading traders.
