Africa is expected to record better growth in merchandise trade in 2024 with trade volume increasing by 5.3 per cent in the year from 3.1 per cent registered in 2023, the World Trade Organisation (WTO) has said in its latest global trade outlook report.
The forecasted growth is way above the global average of 2.6 per cent.
The WTO said on Wednesday, April 10, that if its forecast for 2024 is realized, Africa’s exports will finally exceed their 2019 level by the end of this year, but imports will only just match their earlier level.
According to the report, Africa was the only region that saw its imports decline since 2019, with a cumulative drop of 5 per cent. This suggests that increased export revenue from higher commodity prices did not translate into greater consumption and income in the region.
Africa’s import volume growth is expected to increase by 4.4 per cent in 2024 from a contraction of 2.4 per cent a year before, helping to prop up global demand for traded goods this year. All other regions are expected to see below average import growth.
More broadly, high energy prices and inflation continued to weigh heavily on demand for manufactured goods, resulting in a 1.2 per cent decline in world merchandise trade volume for 2023.
The New Times Business Editor Julius Bizimungu spoke to WTO’s Senior Economist, Coleman Nee, to break down last year’s global trade growth trends and explain the outlook for 2024.
The interview has been edited for clarity and brevity.
Below are excerpts;
1. Despite a decline in global merchandise trade in 2023, commercial services exports were up 9per cent to $7.54 trillion. What explains the better performance in commercial services?
Some of it is the ongoing recovery from the pandemic. Travel spending was up 71% in 2022 and 38% in 2023 but it only ended up 4% higher than in 2019.
Also, spending on other commercial services including business services tends to be very stable with respect to the business cycle, so in general, services trade is a force for stability.
2. What services performed better and from which regions can this growth largely be attributed to?
Travel, as mentioned above. In general, digitally delivered services have performed better than goods and also other types of services, up 9% in 2023 and 50% compared to pre-pandemic levels.
3. WTO economists have revised the growth forecast for merchandise trade for 2024 and 2025 to 2.6% and 3.3% after falling 1.2% in 2023. What does this expected positive performance based on?
I would characterize 2.6% growth in 2024 as moderate. Mostly it is the easing of inflation, so the EU [European Union] will cease to be a drag on import demand. Then some of it is ongoing recovery from the pandemic, which is still being felt in a number of ways.
China only really relaxed their pandemic controls at the start of last year, and the hoped-for surge in spending did not materialize.
Overall, most industrialized countries should see trade recover gradually in 2024, with all regions making a positive contribution to growth on both the import and export side.
4. What goods whose performance are expected to recover more than others?
We do not necessarily have forecasts by product. But we have seen trade in automotive products already surged in 2023 so growth may slacken off there.
Surprisingly, trade in clothing, textiles and electronics declined in 2023, so they could see a rebound this year.
5. You indicate that major economies will drive the growth in trade. What countries or regions will push this growth?
Asian economies will make a large contribution to import demand, partly due to their return to growth and partly due to their weight in world trade.
Europe will recover more gradually, ceasing to be a negative in 2024 and finally adding to growth in 2025.
6. How is the African region in particular expected to grow both in merchandise trade and commercial services exports?
Africa should see moderate growth in 2024, with merchandise export volume up 5.3% and import volume up 4.4%. It has been flat on average in volume terms since the pandemic but imports have been negative.
They are only expected to surpass their 2019 level by the end of this year.
7. What commodities/goods will shape the outlook in the case of Africa, and what countries?
Commodity prices have come down, which is good news for net importers but less positive for net exporters (e.g., oil, natural gas).
8. The WTO Director General Ngozi Okonjo-Iweala has said, “We are making progress towards global trade recovery, thanks to resilient supply chains and a solid multilateral trading framework.” isn’t that too optimistic in light of ongoing war in Ukraine and Red Seas disruptions?
Actually, trade has held up in the face of major shocks. Merchandise trade volume was essentially flat throughout 2023 – the 1.2% decline is only relative to 2022.
It was also up 6.3% compared to the pre-pandemic peak in the third quarter of 2019, and up 19.1% compared to 2015. So, the big picture is really one of resilience in international trade.
As for the Red Sea crisis, its short-term economic impact has been limited to date but its longer-term impact will depend on how long it persists and, on the frequency, and severity of attacks.
9. How will these disruptions and geopolitical tensions likely shape the outlook for the next one to two years?
Geopolitical tensions do not have a direct impact on the forecast because the future is unknown, but they do make it more likely that actual trade growth will be at the low end of our estimated range.
10. Last year, WTO warned of the increasing risk of deglobalization during which it said that trade was becoming increasingly reoriented along geopolitical lines. Will this trend continue? To what extent does it threaten to affect trade growth?
We do see some evidence of fragmentation along political lines, but it is not dramatic. Bilateral United States/China trade has grown less than their trade with other countries, but trade relationships overall have not changed much compared to the pandemic period.
Fragmentation is more a risk than a reality so far, but there are some dimensions that remain under-investigated, for example service trade and digital fragmentation.
