World trade will recover steadily after decline in 2023: WTO

The Geneva-based trade body said easing inflationary pressures should help the volume of merchandise trade rise by 2.6% in 2024 and 3.3% in 2025, after a decline of 1.2% last year. The WTO had previously forecast a 3.3% increase in 2024.

At the same time, the WTO warned of the risks of trade fragmentation due to geopolitical tensions, rising protectionism and the worsening crisis in the Middle East, where attacks on commercial ships in the Red Sea have already diverted trade between Europe and Asia.

Before last year, global trade had only fallen in two years since the creation of the WTO in 1995. Global trade fell 5% during the 2020 pandemic and more than 12% during the 2009 global financial crisis.

In 2023, import demand was especially weak in Europe, where the impact of rising energy prices and inflation was most intense.

The WTO noted that risks to its 2024 forecasts were skewed to the downside, ranging between -1.6% and 5.8%.

In a sign of rising geopolitical tensions in recent days, US Treasury Secretary Janet Yellen warned China that Washington will not accept the decimation of new industries and the European Union opened a new front against Beijing with an investigation into Chinese wind turbine manufacturers.

WTO chief economist Ralph Ossa said there were signs of trade fragmentation but not deglobalisation, and that trade growth was continuing but at a slower pace than in the 1990s.

The WTO has previously estimated that a complete decoupling of the world into geopolitical blocs could reduce global GDP by 5%.

On the Red Sea, through which 12% of world trade normally passes, the WTO said shipping had slowed but not stopped, and sea freight rates were contained.

Ossa said the situation needed to be watched closely, adding that the risk of oil prices soaring from an escalation of the Middle East crisis would likely be more significant than the disruption of the Suez Canal itself.

“As soon as energy prices are significantly affected, then of course we will feel repercussions on international trade,” he said.