Dubai, January 20, 2024 – The Director-General of the World Trade Organisation (WTO), Ngozi Okonjo-Iweala, provided insights at the World Economic Forum in Davos, projecting that global trade is set to recover in 2024. The forecast suggests a growth rate of about 3.3%, a significant leap from the 0.8% in 2023. However, the WTO chief cautioned that geopolitical frictions and upcoming presidential elections across several nations pose potential threats to this optimistic outlook.
Challenges Ahead for Global Trade
Despite a general trend towards normalization after a series of global crises, including the Covid-19 pandemic and the Russia-Ukraine war, new geopolitical tensions are surfacing. These include the Israel-Gaza war, the Houthi rebels’ activities in the Red Sea, US-China trade disputes, and the uncertain implications of a potential second Donald Trump presidency in the USA. Such tensions have the capacity to disrupt trade flows, thereby affecting global economic stability.
Impact on Shipping Routes
The Red Sea, a crucial maritime route connected to the Mediterranean by the Suez Canal, has become a hotspot for recent disruptions. The canal, which facilitates about 12% of global shipping traffic, has seen a reduction in the number of transiting commercial vessels due to these tensions. As a result, shipping companies have had to reroute, often taking the longer and more expensive path around the Cape of Good Hope.
Container Freight Rates and Economic Outlook
Freight rates have experienced a sharp increase, doubling or even tripling on major east-west routes compared to the previous year, although they have not reached the peaks of 2021-2022. The WTO’s apprehension is that the recovery could be dampened unless significant geopolitical crises are averted.
The WTO’s perspective on global trade for 2024 is cautiously optimistic, recognizing both the potential for recovery and the substantial risks posed by ongoing and emerging geopolitical tensions. The situation remains dynamic, with the global economy awaiting the concrete outcomes of these multifaceted challenges.
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