WTO cuts 2025 world merchandise trade growth forecast to 3% from 3.3%

The World Trade Organization (WTO) on Thursday revised downwards its projection of world merchandise trade growth to 3 per cent in 2025, from its earlier estimate of 3.3 per cent.

For 2024, the WTO revised upwards its forecast for merchandise trade growth to 2.7 per cent, up from the previous estimate of 2.6 per cent.

However, the multilateral trade body in its latest bi-annual trade outlook ‘Global Trade Outlook and Statistics’ said that risks to the forecast are firmly on the downside due to regional conflicts, geopolitical tensions and policy uncertainty.

In case of an escalation in the West Asia conflict, the effects would also be felt in other regions, including through further disruptions to shipping and rising energy prices on the back of higher risk premiums.

“While the disruptive impact of the Red Sea crisis has been contained to date, other routes could be impacted in a wider conflict. There would also be a heightened risk of energy supply disruptions given the region’s prominent role in petroleum production. Higher energy prices would dampen economic growth in importing economies and weigh on trade indirectly,” it said.

The first half of 2024 saw 2.3 per cent year-on-year increase. The rebound came against the backdrop of a slump in 2023 – of 1.1 per cent – driven by high inflation and rising interest rates.

The report further said that Europe has continued to weigh heavily on global merchandise trade in 2024, acting as a drag on overall performance for both imports and exports. The main sectors driving European negative export performance include chemicals due to change in the trend after a surge in demand during the pandemic.

“The contraction in the automotive sector raises more concerns due to potential ripple effects across value chains. In European imports, the largest contraction was in machinery, with a substantial reduction in imports from China. This reduction is not simply the result of fragmentation, since similar declines are observed across geopolitically aligned economies such as the United States, the Republic of Korea and Japan. Conversely, imports from India and Vietnam are rising, hinting at their emerging role as ‘connecting economies,” it said.

Exports from Asia are experiencing a rebound, due to key manufacturing economies such as China, Singapore and South Korea. On the import side, Chinese import growth remains moderate, while Singapore, Malaysia and other Asian economies, including India and Vietnam, show stronger growth.