Economic Alert: WTO Increases Global Trade Growth Forecast

The World Trade Organization (WTO) increased its forecast for global trade volumes for 2024, to 2.7% from its April forecast of 2.6%, and said trade would likely increase by 3% in 2025.

The organization noted the downside risks from increasing geopolitical tensions and increased economic policy uncertainty. The WTO also cited “diverging monetary policies” as another downside risk that “could lead to financial volatility and shifts in capital flows as central banks bring down interest rates.”

In the October 2024 update of “Global Trade Outlook and Statistics,” WTO economists note that global merchandise trade increased in the first half of 2024 with a 2.3% year-on-year increase. This was a reversal of 2023, when global trade fell by 1.1%, a fall attributed to high inflation and rising interest rates. Lower inflation by the middle of 2024 allowed central banks to cut interest rates. This should raise real household incomes, boost consumer spending, and increase business investment.

“We are expecting a gradual recovery in global trade for 2024, but we remain vigilant of potential setbacks, particularly the potential escalation of regional conflicts like those in the Middle East,” said Director-General Ngozi Okonjo-Iweala.

“The impact could be most severe for the countries directly involved, but they may also indirectly affect global energy costs and shipping routes. Beyond the economic implications, we are deeply concerned about the humanitarian consequences for those affected by these conflicts,” she said.

Trade in Services

The WTO reported an 8% year-on-year growth in the US dollar value of commercial services trade recorded in the first quarter of 2024.