Translate to English: Last year, global trade shrank by 1 trillion US dollars, c

After experiencing a decline over several quarters, can global trade rebound in 2024?

The United Nations Conference on Trade and Development (UNCTAD) released the latest Global Trade Update Report (hereinafter referred to as the "Report") on the local time of the 21st. Preliminary data shows that global trade shrank by $1 trillion in 2023, mainly due to the low demand in developed countries and weak trade in East Asia and Latin America. The World Trade Organization (WTO) will update the trade outlook data in April.

However, the aforementioned report also indicates that after several quarters of decline, international trade is expected to rebound in 2024. This is due to the easing of global inflation and the improvement of economic growth expectations. The increasing demand for environmentally friendly products, especially electric vehicles, is expected to promote trade this year.

Marcos Casarin, a senior economist at Oxford Economics, told Yicai journalists that in 2024, the global consumer market will grow for the fourth consecutive year. "Compared to the growth rate of over 3% in 2022-2023, we predict a growth rate of 2.3% adjusted for inflation. Although it may not sound impressive, it indicates that consumers still maintain strong resilience after two years of high inflation and high interest rates dragging down their real income."

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In 2023, service trade grew against the trend

WTO Director-General Okonjo-Iweala recently stated that the volume of merchandise trade in 2023 may be lower than the 0.8% growth rate predicted by the WTO in October 2023, and the WTO's prediction of a 3.3% increase in global trade in 2024 may be overly optimistic.

The latest data from UNCTAD shows that after reaching a historical high of $32 trillion in 2022, global trade fell by 3% in 2023, down to $31 trillion.

Among them, merchandise trade decreased by 5%, but service trade grew against the trend by 8%, adding $500 billion compared to the previous year, with the tourism industry and tourism-related services growing by nearly 40%. The report believes that this indicates that trade still has resilience under challenging conditions.

Looking at the regions, although the merchandise trade of the main economies generally declined throughout 2023, there were exceptions.

At the end of 2023, the merchandise trade of several major economies increased, including China (import growth of 5%) and India (export growth of 5%), but the merchandise trade of Russia and the European Union declined.Developing and developed countries exhibit different trade performances, with the former experiencing a decline of about 4% and the latter about 6% overall. South-South trade, which refers to trade between developing economies, saw an even greater decrease of approximately 7%. However, these trends reversed in the last quarter of 2023, with developing countries and South-South trade recovering growth, while developed countries' trade remained stable.

Additionally, trade among African economies grew by 6% in 2023, defying the global trend, while intra-regional trade in East Asia (-9%) and Latin America (-5%) lagged behind the global average.

From an industry perspective, most sectors saw a decrease in trade volumes, with the exception of pharmaceuticals, transportation equipment (mainly due to increased demand for wide-body aircraft), and the automotive industry, which saw a 14% increase in trade. The automotive sector was primarily driven by the demand for electric vehicles.

Conversely, industries such as apparel, chemicals, and textiles experienced significant declines in 2023. However, most industries rebounded in the fourth quarter of 2023, with the exception of the apparel industry, which saw further contraction in trade.

Can global trade continue to improve in 2024?

Facing 2024, UNCTAD's outlook is relatively optimistic. UNCTAD indicates that existing data for the first quarter of 2024 suggests that global trade will continue to improve, especially considering the easing of global inflation and improved expectations for economic growth, with the global GDP growth rate expected to remain around 3%. At the same time, the demand for environmentally friendly products, particularly electric vehicles, will play a key role in driving trade growth.

In 2023, trade in environmentally friendly products grew by 2%, driven by the surge in electric vehicle sales, highlighting changes in market demand and preferences.

Looking ahead to 2024, Cassarino told reporters that, according to forecasts, consumer markets in Asia and the Middle East will lead growth this year, driven by the expanding urban middle class.

He explained that African markets will also grow rapidly, but almost entirely driven by population growth, with more opportunities for growth in staple and apparel products.The Oxford Economics Institute also predicted in a recent report on consumption that by 2024, India and China are expected to capture the largest market share in the global consumer market, outperforming other emerging markets. The institute further forecasts that by the end of this year, India will surpass Japan to become the fourth-largest market, and China is expected to overtake the Eurozone as the second-largest consumer market by 2027.

At the same time, regarding the still robust U.S. market, Casalin stated, "Although it has been proven that U.S. consumers are more resilient than expected, we predict that by 2025, the growth of U.S. consumers will eventually cool down. On the other hand, the European consumer market, after experiencing a stagnation due to the cost of living crisis in 2023, is showing signs of recovery."

He explained that after three years of exceptionally high growth rates and price increases caused by distortions from the pandemic and energy price shocks, 2024 will mark a return to the pre-pandemic equilibrium of consumption, where overall expenditure growth is not significant and is mainly driven by quantity expansion rather than price adjustments. "This pattern is most evident in Europe, as the cost of living crisis hit consumers there the hardest. For instance, we predict that this year's consumption expenditure growth rate will significantly slow down from 6.4% in 2023 to 2.6%, but the quantity growth rate will nearly double, reaching 0.9%," he said.

Key Influencing Factors

However, UNCTAD also warned in the report that geopolitical tensions and supply chain disruptions remain key factors affecting bilateral trade trends and require continuous attention.

UNCTAD stated that disruptions to shipping routes, especially those related to security issues in the Red Sea and the Suez Canal, as well as the adverse effects of climate on the water levels of the Panama Canal, could lead to increased shipping costs, extended voyages, and supply chain disruptions.

Data from the International Monetary Fund (IMF) shows that the Suez Canal is the shortest maritime route between Asia and Europe, typically accounting for about 15% of global maritime trade volume. Shipping companies have rerouted around the Cape of Good Hope, which has extended delivery times by an average of 10 days or more.

After conducting high-frequency transit calculations using data from its PortWatch platform, the IMF found that in the first two months of this year, the trade volume through the Suez Canal decreased by 50% year-on-year, while the trade volume rerouted around the Cape of Good Hope surged by 50%, expected to be 74% higher than last year's level. Meanwhile, the transit trade volume through the Panama Canal decreased by nearly 32% compared to the previous year.

The platform also shows that in January and February 2024, the port calls at 70 ports in sub-Saharan Africa tracked by the IMF decreased by 6.7% year-on-year. The corresponding decline in ports in the EU, Middle East, and Central Asia was 5.3%."If this continues, the cascading effects of these disruptions could temporarily hinder some supply chains in the affected countries, leading to upward pressure on inflation (partly due to increased transportation costs)," the IMF explained. One of the significant impacts is that import and export data may be temporarily affected by the rerouting of ships, making it more difficult to gauge the trends in global trade and economic activity in the coming months.