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International bodies expect global trade growth to more than double this year as inflation eases and a booming U.S. economy helps boost activity.
The OECD, IMF and World Trade Organization forecast a significant recovery in global product flows this year after a slowdown in 2023 due to higher prices, rising interest rates and weaker demand.
According to the OECD, global trade in goods and services is expected to rise to 2.3 percent this year and to 3.3 percent in 2025. Last year growth was just 1 percent.
Clare Lombardelli, chief economist at the OECD, said much of the increase was due to a “cyclical recovery” as trade increased in line with broader economic growth. She added that China and East Asia were expected to be key drivers of activity.
An increase in trade has already helped boost growth in some of the EU’s largest economies in the first quarter of 2024. Overall growth in the euro zone rose to 0.3 percent, the strongest since the third quarter of 2022.
“We have better trading numbers this year and next year – we have seen quite positive developments on the trading side,” Lombardelli said.
In its latest global economic outlook, the IMF also predicted that global trade volume growth would reach 3 percent in 2024. The WTO, which does not make forecasts for trade in services, expects trade in goods to rise 2.6 percent in 2024, down 1.2 percent last year.
“We are seeing some upticks in global trade,” said Neil Shearing, chief economist at Capital Economics, adding that the “manufacturing recession” that hit trade activity in 2023 as demand fell “has now run its course “.
He pointed to the tentative recovery in Europe, which is particularly dependent on trade, with southern countries benefiting from a recovery in tourism.
Spain, for example, benefited from Easter holidays falling in March instead of April, which boosted growth in the first quarter. According to the country’s statistics office, external demand contributed 0.5 percentage points to quarterly growth, while domestic demand contributed 0.2 percentage points.
Both Germany and Italy said higher net exports also boosted growth in the first quarter.
“We had expected euro zone foreign trade to pick up this year, although there are now signs that the recovery, particularly in exports, came sooner than we previously thought,” said Salomon Fiedler, an economist at Deutsche Bank Berenberg.
Merchandise trade grew for the first time in a year in February, according to the World Trade Monitor published by the Netherlands’ Bureau for Economic Policy Analysis (CPB).
Expansions in China and the US helped annual goods trade growth rise to 1.2 percent in the second month of the year, up from a 0.9 percent decline the previous month and a sharp rebound from a 3.5 decline percent in September 2023.
But despite the early signs, global trade growth is not expected to return to pre-pandemic levels this year. IMF figures show that trade volumes in goods and services grew at an average annual rate of 4.2 percent between 2006 and 2015.
The OECD, IMF and WTO have warned of the risks to trade posed by geopolitical tensions, regional conflicts and economic uncertainty as governments focus on national security, self-reliance and support for domestic businesses.
According to the WTO, trade flows between blocs of geopolitically like-minded countries have grown 4 percent slower than trade within those blocs since Russia’s all-out invasion of Ukraine.
Shearing said the U.S. election added to the list of uncertainties about global trade in the coming year. Donald Trump, the former president and presumptive Republican nominee, has promised to impose a 10 percentage point increase in tariffs on all of the U.S. trading partners if he is re-elected, suggesting even harsher penalties for Chinese imports.