The World Trade Organization reduced its estimates of global trade growth in 2025 from 3.3% to 3%, attributing this to the worsening crisis in the Middle East represented by the continuation of the war on the Gaza Strip and Lebanon and the continuation of the Russian-Ukrainian war.
The organization expected that if the two crises did not worsen, global trade would grow this year by 2.7%, revising the level from 2.6% that it expected last April.
A report by the organization stated that global trade recovered this year from a decline in 2023 caused by high inflation and an increase in interest rates.
The Director-General of the Organization, Ngozi Okonjo-Iweala, said in a statement, “We expect a gradual recovery in global trade in 2024, but we remain cautious of possible setbacks, specifically the possibility of escalating regional conflicts such as those in the Middle East.”
She added, “The impact may be most severe on the participating countries directly, but it may also indirectly affect global energy costs and shipping lanes.”
Israel’s escalating attack on Lebanese Hezbollah in the past few weeks has fueled fears of an unstoppable slide into a Middle East-wide war. Israel’s attack comes a year after the outbreak of aggression in the Gaza Strip.
The World Trade Organization also pointed to the difference in monetary policies between major economies, especially between the United States and China, as another risk factor to the outlook.
This “could lead to financial volatility and shifts in capital flows as central banks cut interest rates,” the report said, adding that this would make it more difficult for poorer countries to service debt.
“There is also the possibility of a somewhat limited upside in expectations if interest rate cuts in advanced economies stimulate stronger-than-expected growth without reviving inflation,” the organization said.
Trade that once flowed between China and the United States now passes through so-called connector countries, and the WTO looks to Vietnam and Mexico in its latest analysis to illustrate this, Ralph Osa, chief economist at the World Trade Organization, said during a press conference.
“You feel like some of the trade that used to flow bilaterally is taking a longer path, so that’s clearly a shift we’re seeing,” he said.
The report also highlighted different speeds of trade growth depending on the sector and geographical location.
