The Yellow Book of the World Economy: Trade Difficulties to Rebound Strongly in 2024, but Growth Rates Rebound

On January 17th, the Institute of World Economy and Politics of the Chinese Academy of Social Sciences and the Social Science Literature Publishing House jointly released the "Yellow Book of World Economy: Analysis and Prediction of the World Economic Situation in 2024", pointing out that although world trade will not rebound strongly in 2024, the growth rate is higher than in 2023.

According to the Yellow Book, the World Trade Organization predicts a trade growth rate of 3.3% in October 2023, which is 2.5 percentage points higher than the growth rate in 2023; The International Monetary Fund predicts a trade growth rate of 3.7% in 2024, which is 1.7 percentage points higher than in 2023; The World Bank predicts that the trade growth rate in 2024 will be 2.8%, which is 1.1 percentage points higher than in 2023. On average, these three major international organizations predict a trade growth rate of 3.3% in 2024, which is 1.4 percentage points higher than in 2023. Huangpi Book believes that the judgment that trade will not rebound strongly in 2024 but the growth rate will rebound is mainly based on three reasons:

Firstly, economic growth remains weak. Currently, the global economic recovery is slowing down, while factors hindering economic growth in 2023 will still exist in 2024. Given the high core inflation, major central banks may adopt further interest rate hikes to combat inflation, which will continue to drag down economic activity. According to the predictions of the World Trade Organization, International Monetary Fund, and World Bank, the world economic growth rate in 2024 will be 2.5%, 3.0%, and 2.4%, respectively, which are -0.1%, 0%, and 0.3 percentage points higher than in 2023, and far lower than the average annual level of 3.8% from 2000 to 2019. Therefore, from the perspective of cyclical or demand factors, the driving force of the world economy on trade in 2024 remains weak, which is basically equivalent to 2023. This is the main reason why global trade in goods is unlikely to rebound strongly in 2024.

Secondly, structural factors are also important factors affecting trade growth, and the structural factors in 2023 will continue until 2024. The impact of important events such as the Ukraine crisis, the Palestinian Israeli conflict, and China US relations continues to exist. Among them, the crisis in Ukraine and the conflict between Palestine and Israel are difficult to resolve in the short term, and the easing of Sino US relations is not an overnight matter. There may be increased risks, leading to a resurgence of global inflation. The impact of the epidemic on global industrial chains and trade is long-term. The trend of localization, regionalization, and alliance of industrial and supply chains will continue to drag down global trade growth.

Thirdly, as one of the structural factors, the base period factor cannot be ignored. Historical experience has shown that the base period factor is very important. The unexpected decline in the growth rate of world trade in 2023 has led to a lower base in 2023, which is an important reason for the rebound in trade growth in 2024.