The World Trade Organization (WTO) has predicted that global goods trade will recover steadily this year, albeit more slowly than initially anticipated, following a 1.2% contraction in 2023 – the third such decrease since its establishment in 1995.
The World Trade Organization has updated its Global Trade Outlook and Statistics report, which now indicates that merchandise trade volume will experience a growth rate of 2.6% in 2024. This figure is lower than the previously anticipated expansion of 3.3%. However, for the following year, an increase of 3.3% is predicted.
The organization cited easing inflationary pressures as the primary catalyst for this rebound.
However, the WTO flagged potential risks to its forecast, including trade fragmentation due to geopolitical tensions, rising protectionism, and escalating crises in the Middle East that have already disrupted shipping lanes.
Before the global economic downturns in 2009 and 2020, international trade had remained resilient despite various challenges.
In 2020, global trade shrank by 5% due to the COVID-19 pandemic, while it contracted more than 12% during the global financial crisis in 2009.
European import demand was particularly weak last year, with inflation and high energy prices causing significant economic pressure.
The WTO warned that there is a greater likelihood for their 2024 projection to fall below expectations, which could range from -1.6% to +5.8%.
Recent developments in international economics have led to heightened tensions between significant players like the United States and China. U.S. Treasury Secretary Janet Yellen has voiced her concerns over potential harm to new industries in China, while the European Union is scrutinizing Chinese wind turbine manufacturers' practices.
The Geneva-based trade body said easing inflationary pressures should help the volume of merchandise trade increase by 2.6% in 2024 and by 3.3% in 2025
KITCO
WTO Chief Economist Ralph Ossa acknowledged evidence of trade fragmentation but stated that it did not equate to deglobalization, as global trade growth continued at a slower pace compared to the 1990s.
The WTO's analysis suggests that a complete breakdown of international trade relations could lead to a decline in the world economy by as much as 5%.
Regarding the Middle East crisis, while shipping has been affected, it has not come to a complete halt, and maritime freight rates have remained relatively contained.
Per Ossa's perspective, a heightened Middle East crisis could lead to considerable oil price increases, which could potentially overshadow the ramifications of the Suez Canal disruption. Thus, vigilance is necessary in this regard.
Zooming in on India
In the case of India's exports, electronics and pharmaceuticals emerged as major growth areas despite various challenges, with electronic goods witnessing a 23.62% yearly increase to $25.59 billion, and drugs and pharmaceuticals experiencing a 9.4% rise to $25.02 billion.
The export revenue for iron ore saw a massive jump by 154.55%, resulting in $3.64 billion, the cotton yarn and handloom sector reported growth of 6.75% to accumulate $10.59 billion, and ceramic products and glassware witnessed an increase of 15.77%, generating exports worth $3.89 billion.
Exports of gems and jewellery dropped by 14.57% due to weak global demand.
Despite these challenges, India continued to import essential commodities like diamonds and crude oil since it does not produce them domestically. Refined fuel, precious stones, and fine jewelry were among the exports, resulting in increased worth.
With ongoing negotiations for several free trade agreements (FTAs), India is expected to push exports over time by expanding its market access to key destinations like the European Union, the United States, and other countries.
India's Foreign Trade Agreements (FTAs) play a significant role in promoting exports, with agreements being pursued or already established with 71 countries, representing about 74.7% of India's total export market.
With economic stress decreasing and wages increasing, international trade in goods is anticipated to persistently increase, creating prospects for both exporters and importers.