Context

Global Trade Body ‘WTO’ in its recently released Bi-annual report “Global Trade Outlook and Statistics” says global trade will pick up in 2024 but downward risks remain.

WTO Global Trade Outlook and Statistics Report: Key Highlights

• World Merchandise Trade volume: It is projected to grow 2.6% in 2024 and 3.3% in 2025, following a larger-than-expected decline of -1.2% in 2023. 
  • By the end of 2023, merchandise trade volume was up 6.3% compared to 2019. Commercial services also increased, with annual US$ values up 21% between 2019 and 2023. 
  • India’s share of global goods exports was 1.8% in 2023 and imports was 2.8%.
• World Real GDP Growth at market exchange rates: It is slowed from 3.1% in 2022 to 2.7% in 2023 but is expected to remain mostly stable over the next two years at 2.6% in 2024 and 2.7% in 2025. 
  • linked to inflationary pressures: The contrast between the steady growth of GDP and the slowdown in merchandise trade volume is linked to inflationary pressures, which had a downward effect on consumption of trade-intensive goods.

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• US Dollar Value of Merchandise Counterbalanced by Commercial Services Trade: 
  • The US dollar value of global merchandise trade dropped by 5% to US$ 24.01 trillion. However, this decline was largely counterbalanced by a robust 9% increase in commercial services trade, reaching US$ 7.54 trillion. 
  • In global commercial services, India’s share in exports is seen 4.4% in 2023 at $344 billion, up 11% on-year whereas imports is seen as 3.4% at flat at $247 billion.
  • Reasons Behind the Shift: The decrease in merchandise exports can be attributed in part to the declining prices of commodities like oil and gas. Conversely, the upsurge in commercial services trade was fueled by the resurgence of international travel and the booming market for digitally delivered services.
• Digitally Delivered Services:
  • India is now 4th largest exporter of Digitally Delivered Services (India’s share rose to 6% in 2023 from 4.4% in 2019)and reached $257 billion in 2023 in the World, marking a 17% increase compared to the previous year.
  • This growth outpaced that of Germany and China, which saw 4% growth each.
• Future Outlook: In 2024 and 2025, inflation is expected to gradually abate, allowing real incomes to grow again in advanced economies, boosting consumption of manufactured goods. 
  • A recovery of demand for tradable goods in 2024 is already evident. This is related to an increase in household consumption linked to improved income prospects. 

• Potential Challenges: Risks to the forecast are on the downside due to current geopolitical tensions and policy uncertainty. 
  • Conflict in the Middle East has diverted sea shipments between Europe and Asia while tensions elsewhere could lead to trade fragmentation. 
  • Rising protectionism is another risk that could undermine the recovery of trade in 2024 and 2025.