WTO warns that geopolitical tensions could undermine trade growth in 2024

The World Trade Organization assured this Wednesday in its forecast report that, after a year of 1.2% contraction (2023) global trade will grow again by 2.6% this year thanks to the relief of inflationary pressures and by 3.3% in 2025. This will allow people’s real income to increase again and, consequently , will increase the consumption of manufacturing products.

However, the international organization warned that these figures may be truncated by geopolitical tensions and political uncertainty. “They could limit the extent of trade recovery. energy and food prices could suffer strong increases due to geopolitical events,” they say.

The director general of the WTO, Ngozi Okonjo-Iweala, assured that the world is “moving forward” towards trade recovery thanks to “the resilience of supply chains.” At the same time, the leader reiterated that it is “imperative” that geopolitical risks and trade fragmentation be mitigated “to maintain growth and stability.”

As for countries, Spain managed to hold its own last year, partly overcoming the trade crisis. Spanish exports are 1.8% with respect to the rest of the world and showed a small gain in market share of one tenth. Even so, it is very far from its surrounding economies such as Germany, which remained in third position with a foreign quota of 7%; Italy (2.8%) and France (2.7%).

For its part, and despite all protectionist measures, China continues to lead the world list of exporters, with a market share that exceeds 14%. In second position, well below China, is the United States, whose market share is a little more than half of China’s (8.5%). On the other hand, the United States is the country that imports the most (13.1% of the total), while China is in second position with a share of 10.6%.

GDP will remain stable

The WTO report estimates that global GDP growth will remain “stable” in the coming years, estimating growth at 2.6% for 2024 and closing in 2025 at 2.7%, after the drop of 2.6%. .7% in 2023. Likewise, they reiterate that the contrast between the sustained growth of real GDP and the slowdown in the volume of merchandise trade “is linked to inflationary pressures, which caused the consumption of goods that are the object of trade to decrease. particularly in Europe and North America,” they say.

Risks of deterioration

In the report they present an analytical basis in which they list different factors that could deteriorate world trade between now and the coming years. Specifically, in addition to geopolitical tensions and uncertainty, there is the crisis in the Red Sea. “While the economic impact of the disruptions of the Suez Canal resulting from the conflict in the Middle East has so far been relatively limited, some sectors (automotive products, fertilizers and retail trade) have already been affected by delays and increased freight costs,” the document states.

Regarding geopolitics, the data from their research show that the tensions “have marginally affected” international trade, but they do not see that it has triggered a phenomenon of deglobalization. Bilateral trade between China and the US grew by 30% less after having reached its maximum in 2022. In addition, throughout 2023, world trade in intermediate goods, excluding fuel, fell by 6%, “which allows us to get an idea of ​​the situation of global value chains,” he emphasizes. The report.

In this sense, the chief economist of the WTO, Ralph Ossa, noted that some governments “have become more skeptical” about the benefits of trade and have adopted measures aimed at relocating production and “reorienting trade towards friendly countries.” The expert pointed out that these disturbances in the routes, such as what is happening in the Suez Canal, or the drought in the Panama Canal, suggest that there are risks to the commercial prospects “that tilt the balance unfavorably,” he said.