An escalation of the conflict in the Middle East could further disrupt shipping and raise energy prices given the region’s importance in petroleum production, World Trade Organization (WTO) cautions.
- The higher energy prices would dampen economic growth in importing economies and weigh on trade indirectly. This even as WTO expects a gradual recovery in global trade for 2024.
- According to WTO, the disruptive impact of the Red Sea crisis has been contained to date, but other routes could be impacted in a wider conflict.
- Maritime shipping is the main mode of transport for internationally traded goods, accounting for more than 80 per cent of international trade by volume.
“We remain vigilant of potential setbacks, particularly the potential escalation of regional conflicts like those in the Middle East. The impact could be most severe for the countries directly involved, but they may also indirectly affect global energy costs and shipping routes. Beyond the economic implications, we are deeply concerned about the humanitarian consequences for those affected by these conflicts,” says WTO Director-General Ngozi Okonjo-Iweala.
“It is imperative that we continue to work collectively to ensure global economic stability and sustained growth, as these are fundamental to enhancing the welfare of people worldwide,” she said.
The attacks on commercial ships in the Red Sea and the Gulf of Aden, which handles around 15 per cent of global trade, have also had a major impact on shipping since November 2023.
The attacks led many carriers to avoid the Red Sea altogether, rerouting vessels around the Cape of Good Hope and causing daily Suez Canal passages to decrease by more than 60 per cent. For most trade routes, rerouting via the Cape of Good Hope results in minimal delays, but Asia-Europe is an exception, experiencing an increased travel time of six to 25 days compared to the more direct route through the Suez Canal.
“The latest forecasts for world trade in 2024 and 2025 only show modest revisions since the last Global Trade Outlook and Statistics report in April, but these projections do not capture some important changes in the regional composition of trade. Historical trade volume data have been revised substantially, including downward revisions to European exports and imports back to 2020. There have also been notable changes in GDP forecasts by region, including a 0.4 percentage point upgrade to North America’s growth, which could influence trade flows in other regions as well,” WTO Chief Economist Ralph Ossa said.
Africa’s export growth is in line with the global trend. It has been revised downward from the April forecast, driven by an overall revision of Africa’s trade statistics, and a greater-than-expected weakening in Europe’s imports, Africa’s main trade partner.
Merchandise exports of least-developed countries (LDCs) are projected to increase by 1.8 per cent in 2024, marking a slowdown from the 4.6 per cent growth recorded in 2023. Export growth is expected to pick up in 2025, reaching 3.7 per cent. Meanwhile, LDC imports are forecast to grow 5.9 per cent in 2024 and 5.6 per cent in 2025, following a 4.8 per cent decline in 2023. These projections are underpinned by GDP growth estimates for LDCs of 3.3 per cent in 2023, 4.3 per cent in 2024 and 4.7 per cent in 2025.
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