Global merchandise trade growth in volume terms may dip 1.2% in 2024: GTRI

The growth in the global merchandise trade is likely to decline by 1.2 per cent, in value terms, due to the ongoing geopolitical uncertainties, economic think tank Global Trade Research Initiative (GTRI) said on Thursday.

The US dollar value of world merchandise trade fell 5 per cent in 2023 to USD 24.01 trillion, but this decline was mostly offset by a strong increase in commercial services trade, which rose 9 per cent to USD 7.54 trillion, it said.

This allowed world goods and commercial services exports on a balance of payments basis to slip 2 per cent in 2023 to USD 30.8 trillion.

"Despite the World Trade Organization (WTO) expecting a 2.6 per cent rise in trade volume for 2024, the value of world merchandise trade is still seen to decline by 1.2 per cent in 2024 from 2023, continuing the trend of trade values falling behind the trade volumes," the think tank said.

The WTO has projected that the world merchandise trade volume will grow by 2.6 per cent in 2024 and 3.3 per cent in 2025.

"The WTO forecast does not include impact on trade values, which is a commonly used parameter to measure trade performance. Calculating the trade value is straightforward, as it involves adding up the values of all transactions. However, calculating trade volume is not as simple as just adding up quantities of different goods like iron ore and diamonds, which could lead to inaccurate conclusions," GTRI founder Ajay Srivastava said.

He said the WTO employs a complex method to calculate changes in trade volumes.
 

He added that "probably" the WTO did not want to be the harbinger of bad news about slowing merchandise trade.

"The WTO adjusts the value of trade to account for changes in prices, a process known as deflation. This involves using specific price indices for different categories of goods and services to ensure that the measured trade volume reflects the actual quantity of goods and services traded rather than their price changes," he noted.

The WTO also uses data from international databases, including trade statistics and price indices, to make these adjustments, Srivastava said, adding that the WTO's methodology also includes adjustments for seasonal variations in trade.

"It periodically updates the base year for its calculations to ensure that the data remains relevant and reflects current market conditions," he said.

In 2023, merchandise exports totalled USD 23.8 trillion, while imports stood at USD 24.2 trillion. This represents a year-on-year decline of 4.5 per cent in exports and 5.4 per cent in imports.

For commercial services, exports rose to USD 7.8 trillion and imports USD 7.2 trillion in 2023. Overall, the total trade (both merchandise and services) slightly decreased in 2023, with exports at USD 31.6 trillion (down by 1.1 per cent) and imports at USD 31.5 trillion (down by 2.1 per cent) compared to 2022.

The decline in world merchandise trade was due to geopolitical tensions, the rising protectionist war in Ukraine, Red Sea shipping disruptions, lower primary commodity prices, and exchange rate fluctuations.

Further, GTRI said that India's merchandise export values in 2023 decreased by 5 per cent over 2022, mirroring the global trends.

However, the overall export growth for the year was positive, thanks to significant 9.9 per cent increases in services exports, again in sync with global trends.

In exports, India ranked 17th globally, with a 1.8 per cent share in world trade, amounting to USD 432 billion, a 5 per cent fall from 2022.

India's rank improved from 18 in 2022 to 17 in 2023.

On imports, India ranked 8th, holding a 2.8 per share, with a value of USD 673 billion, marking a 7 per cent decline from the previous year.

India's rank improved from 9 in 2022 to 8 in 2023.

"GTRI forecast a 1.2 per cent drop in world merchandise trade values in 2024, over 2023," it said.