Red Sea crisis hurt global trade volumes: WTO DG
ABU DHABI : The crisis in the Red Sea, one of the world’s busiest trade corridors, hit global merchandise trade volumes in 2023, according to Ngozi Okonjo-Iweala, Director-General, World Trade Organization (WTO).
These disruptions, coupled with a global economic slowdown, likely led to a less than 0.8% increase in global merchandise trade volumes in 2023, falling short of the WTO’s April projection, Okonjo-Iweala said while speaking at the business forum on the third day of the 13th Ministerial Conference (MC13) in Abu Dhabi.
In April, the WTO had forecast that 2023 merchandise trade volumes will likely grow 1.7%. The 3.3% growth projection for 2024 remains steady.
She pointed out that the immediate shipping disruptions in the Red Sea and the Panama Canal have notably affected growth rates and contributed to inflationary pressures globally.
Okonjo-Iweala also said that the WTO is developing an updated global trade forecast, expected to be released in March.
Following attacks by Yemen’s Houthi group, using drones and missiles, on commercial ships at the southern end of the Red Sea, many shipping companies have suspended their operations in the region, and are taking longer routes to reach their destinations in the Middle East and Europe.
It is one of the world’s busiest cargo transit points with almost 12% of international merchandise trade passing through it, according to estimates.
Despite these challenges and political tensions, Okonjo-Iweala emphasized the resilience of the global goods and services trade. She advocated for reaching out to policymakers to support enhanced investment and sourcing strategies that incorporate new geographies, engage more micro, medium, and small enterprise suppliers, and increase the participation of women in trade.
“The future of trade is green. It is digital. And it must be inclusive. Let’s work together (on it),” she added.
Digital trade refers to production, distribution, marketing, sale or delivery of goods and services by electronic means.
The WTO expects global GDP to grow 2.6% at market exchange rates in 2023 and 2.5% in 2024, according to the multilateral trade agency’s Global Trade Outlook and Statistics released in October.
However, this forecast does not extend to commercial services trade, which appears to be moderating after last year’s robust rebounds in transport and travel sectors. Preliminary data indicates a 9% year-on-year increase in worldwide commercial services trade in the first quarter of 2023, a slowdown from the 19% rise observed in the second quarter of 2022.