UNCTAD predicts global economic growth in 2024 to stand at 2.6%, a notch lower than the previous year’s 2.7%, with further growth deceleration expected this year, according to a recent Trade and Development report (pdf). Building on better than expected results in 2023, there are high hopes interest rate cuts will stimulate growth, but new challenges including trade disruptions, climate change, and ballooning debt to finance private consumption threaten further slowdowns in global economic growth, the report says.

Maritime shipping — the “backbone of international merchandise trade” — was dealt a double blow since last year, UNCTAD says. Houthi attacks in the Red Sea have seen major carriers reroute shipments via the Cape of Good Hope, lengthening journeys by between 12 and 20 days. At the same time, a severe drought in Panama has limited transits at the Panama Canal, and hiked up tolls by up to eight times. Disruptions at these two key global trade chokepoints have severely affected seaborne trade, which accounts for some 80% of goods traded, with freight rates rising even in regions unaffected by the disruptions on the back of ripple effects.

Historic shifts: Global merchandise trade contracted about 1% in 2023, representing the first time in at least four decades when global trade and economic growth moved in opposite directions, the report says, citing new data that is as yet unconfirmed. Growth in merchant trade is expected to remain subdued in 2024, but it should see a turnaround from contraction to growth.

Commodity prices remain above pre-pandemic levels despite declines in 2023, the report says. Energy and metal prices are about 40% higher than their pre-pandemic averages, while food commodities are 35% higher. The boost in commodity prices has had mixed effects, benefiting the trade positions of net exporters while also undermining developing countries that import such goods, particularly least developed countries.

The outlook is uncertain: Commodity prices are expected to continue to fall in 2024, but at a slower rate. Crude oil prices are expected to decline due to falling demand, with positive price pressure due to OPEC+ production cuts offset by booming production in North America, the report adds. However, the trend could see a reversal with energy prices increasing if the security situation in the Middle East deteriorates further or yields more disruptions to energy trade routes.

How our region is shaping up: “Lackluster performance” in Egypt contributed to Africa falling behind on Sustainable Development Goals, with growth in Africa forecasted at 3% in 2024 — up from 2.9% in 2023, the report said. Falling oil prices and production cuts saw KSA’s oil sector contract 8% last year, offsetting 6% growth in the country’s non-oil sector, and resulting in a 0.9% contraction in the country’s GDP in 2023. Despite the outlook remaining grim for KSA’s oil sector, growth in the non-oil sector is expected to drive 2.7% GDP growth in the Kingdom this year. Growth in Turkey’s GDP decelerated to 4.5% in 2023, with severe monetary tightening measures aimed at curbing inflation and stabilizing the TRY forecasted to see the country’s GDP growth slowing further to 3.5% in 2024, the report also said.

World merchandise trade is expected to rebound to 2.6% growth in 2024 and 3.3% growth in 2025, following a 1.2% drop in 2023, according to the World Trade Organization’s (WTO) Global Trade Outlook and Statistics April report (pdf). High energy prices and inflation in 2023 saw imports fall in North America and Europe, however imports surged in the Middle East and the Commonwealth of Independent States (CIS). Despite indications that trade will improve this year, geopolitical tensions, disruptions at the Suez Canal and the Panama Canal, and another wave of inflation risk derailing a recovery in trade, the report also said.

Speaking of the Suez Canal: Contrary to initial reports which foresaw significant economic losses due to Red Sea disruptions and the resultant fall in Suez Canal transits, more recent assessments show that impacts are less severe than initially anticipated, the report said. Several factors were cited as mitigating factors, including continued use of the Suez Canal by some vessels, relatively minor delays due to reroutes around the Cape of Good Hope, a drawdown in maritime freight rates after an initial spike at the beginning of the crisis, robust inventories that smoothed supply chain shocks, stable energy markets, and higher shipping capacity when compared to pandemic levels.

Middle East exports are expected to grow 3.5% and 2.2% in 2024 and 2025, after falling 1.6% in 2023, the WTO said. Contrary to most world regions, Middle East imports gained 9.8% in 2023. Imports in North America and Europe fell 2% and 4.7% during the same period. Middle Eastern exports are projected to grow 1.2% and 2.1% in 2024 and 2025, the report also said.

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