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Mon, Oct 14, 2024 | Rabi al-Thani 11, 1446 | DXB
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Middle East to drive world trade growth in 2025 despite flare-ups: WTO
WTO said Asia’s exports will grow faster than those of any other region this year
A view of Khalifa Port in Abu Dhabi.
The Middle East will be the world’s fastest-growing hub for merchandise imports and the second-fastest in exports in 2025 despite the instability and uncertainty caused by regional conflicts.
The World Trade Organisation (WTO) said Asia’s exports will grow faster than those of any other region this year as it revised downwards its projection of world trade growth to three per cent next year, from its earlier estimate of 3.3 per cent.
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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.
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 2025, Asia’s exports will grow faster than those of any other region this year, rising by as much as 7.4 per cent. It will be followed by the Middle East (4.7 per cent), South America (4.6 per cent), the CIS region (4.5 per cent), Africa (2.5 per cent), North America (2.1 per cent) and Europe (-1.4 per cent).
On the import side, the fastest growing region will be the Middle East (9.0 per cent) followed by South America (5.6 per cent), Asia (4.3 per cent), North America (3.3 per cent), the CIS region (1.1 per cent), Africa (1.0 per cent) and Europe (-2.3 per cent).
In case of an escalation in the Middle East 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,” the WTO said.
The first half of 2024 saw 2.3 per cent year-on-year increase in global trade. The rebound came against the backdrop of a slump in 2023 – of 1.1 per cent – driven by high inflation and rising interest rates.
For 2024, Global Trade Research Initiative (GTRI) predicts a 1.2 per cent decline in the value of global merchandise trade due to geopolitical uncertainties. The US dollar value of world merchandise trade fell 5.0 per cent in 2023 to $24.01 trillion, but this was mostly offset by a strong increase in commercial services trade, which rose 9.0 per cent to $7.54 trillion. This allowed world goods and commercial services exports on a balance of payments basis to slip 2.0 per cent in 2023 to $30.8 trillion.
World real GDP growth at market exchange rates is expected to remain steady at 2.7 per cent between 2023 and 2025. The fastest growing region in 2024 is likely to be Asia, where output is expected to climb to 4.0 per cent, while the slowest growing region is likely to be Europe at 1.1 per cent. Germany has been particularly weak, with GDP growth turning slightly negative in Q2, the WTO report said.
The report added 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.
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