The World Trade Organization (WTO) predicts in its latest updated Global Trade Outlook and Statistics report that despite issues such as geopolitical security and increased policy uncertainty,global merchandise trade will gradually recover,with an expected growth of 3% by 2025.

WTO Chief Economist Ralph Ossa explained that since April,inflation rates in advanced economies have declined as expected,prompting central banks to start lowering interest rates."We anticipate that these developments will stimulate consumption and investment,thereby increasing the demand for imports.In particular,we expect Asian economies to lead the trade recovery,while North America,Europe,and other regions will contribute more moderately,but also positively."

WTO Senior Economist Coleman Nee stated that Asia's export growth has been stronger than expected due to increased shipments of electronic products,automotive products,and other manufactured goods from China.However,other economies in the region have also reported strong export growth,including India,Vietnam,and Singapore.

The Oxford Economics Institute's recent forecast for merchandise trade in 2025 is more optimistic,reaching 4%.This level is slightly below the average for the period from 2010 to 2019."Although we still believe that the medium-term risks to the trade outlook are still skewed to the downside,we think that the risks for next year may not be as negative as in the past," the institute stated.

The Oxford Economics Institute also said in its report that the condition of the industrial sector will improve in 2025,mainly based on the transformation of three key factors: loose monetary policy,the turning point of inventory cycles,and the reduction of drag on energy-intensive industries.

Asian economies lead trade recovery

Ossa said that compared to the forecast in April,the October forecast sees weaker trade in Europe and stronger exports in Asia at the regional level.

He said,"When we try to explain the changes in European trade and imports,we first consider the demand in Europe and the changes in major economies,among which Germany has significantly revised their Gross Domestic Product (GDP) forecast,which means that the German economy is performing worse than expected,and this has also affected imports such as machinery imports."

Ossa also cited that the main reason for the decline in European exports is automotive products and chemicals,both of which are concentrated in Germany.

Nee told reporters from Yicai that the slowdown in economic growth in Europe may reduce the demand for all goods,including machinery.At the same time,WTO data shows that the Asian region's contribution to export growth in 2024 is expected to exceed other regions,adding 2.8 percentage points to the 3.3% export growth rate projected for this year; it is also anticipated that Asia will contribute 1.4 percentage points to the 2.0% import growth projected for this year.

Ni explained that,specifically,the export of electronic products (including components and finished goods) has driven China's export growth,with electronic products seemingly making the largest contribution to the year-on-year growth of China's exports in terms of value.This includes products such as integrated circuits (22%),flat panel displays (20%),and computer components (18%).Exports of other electrical machinery have also seen significant growth,including air conditioning equipment (17%) and refrigerators (18%).

The Oxford Economics Institute also noted in its research that in Asia,due to the booming development of artificial intelligence,economies like South Korea have particularly strong exports of electronic products (especially semiconductors).

Data from the United Nations Conference on Trade and Development (UNCTAD) shows that in Asia,ASEAN countries are expected to maintain a good momentum of foreign capital inflow,thanks to a favorable investment environment,ongoing regional integration,and stable Gross Domestic Product (GDP) growth.

UNCTAD's data indicates that over the past decade,the inflow of foreign direct investment into ASEAN has grown significantly,with an average annual inflow of $170 billion since 2016,almost double the amount during the period from 2006 to 2015 (with an average of $92 billion per year).From 2021 to 2023,ASEAN absorbed an average of $220 billion in foreign capital annually.Among developing economies,Southeast Asia has maintained its position as a major global destination for foreign capital for three consecutive years.

At the same time,ASEAN's share of global foreign capital has soared from an average of 6% between 2006 and 2015 to 17% in 2023.This has led to an increase in the region's foreign direct investment stock from $1.7 trillion in 2015 to $3.9 trillion in 2023.

Growth factors behind the moderate recovery

The WTO stated that by mid-2024,inflation rates have dropped to a level that allows central banks to lower interest rates.Lower inflation rates should increase real household income,promoting consumer spending,while lower interest rates should boost business investment spending.

The WTO pointed out that currently,the most evident weak links in the global economy are Germany and Argentina,with the former's output contracting by 0.3% on an annualized basis in the second quarter.In Germany,the Hamburg Commercial Bank/S&P Global Manufacturing Purchasing Managers' Index (PMI),which serves as an indicator of future trends in the manufacturing industry,fell to its lowest point in 12 months in September,highlighting the challenges faced by the country's manufacturing sector and suggesting a possible recession.The Purchasing Managers' Index in other countries,including the United States,also shows weakness in the manufacturing industry,while the service sector appears to be performing better.

In fact,compared to goods trade,the outlook for services trade remains relatively optimistic.WTO data shows that the global commercial services trade volume,valued in US dollars,grew by 8% year-on-year in the first quarter of 2024.First Financial Daily reporters learned that more comprehensive service industry data will be released later this month,but the WTO expects strong growth to continue in the second quarter.The Oxford Economics Institute also stated in its research that in recent years,the weak trade performance seems to reflect that global GDP growth is driven by the service industry with lower trade intensity,while the manufacturing industry remains sluggish.

However,"although the structural decline in future global GDP growth will impact global trade,we still expect that trade growth after 2025 will be slightly better than the records of the past few years.One important reason is that we expect a rebound in industrial production." The institute said that although we expect the global GDP growth rate in 2025 to be the same as this year,at 2.7%,we expect the world industrial production growth rate to rise from 2.2% this year to more than 3% in 2025,thus ending the situation of poor performance for three consecutive years.

Kiki Sondh,an economist at the Oxford Economics Institute,said that we believe that the future days of the industrial sector will be better,mainly based on the transformation of three key factors.

First,loose monetary policy."In the past few years,tight monetary policy has had a particularly severe impact on the industrial sector,as the output demand of the industrial sector is usually very sensitive to interest rates.In fact,our research shows that the recent poor industrial performance in developed economies is largely consistent with the economic slowdown caused by tight monetary policy." Kiki Sondh said that from an industry level,the performance of building materials and machinery is still poor globally.At present,interest rates will gradually ease,and investment performance will also improve.It is expected that investment will grow by 3.7% in 2025,a significant increase from the possible 2.4% growth this year,which is a good sign for these industries.

Second,the inventory cycle turns supportive."Many companies in various industries spent most of last year reducing inventory,leading to slower growth in production and major input imports than the growth in orders.Now,preliminary signs indicate that the inventory cycle in major developed economies is turning,which suggests that the downward pressure on production will weaken from here." Kiki Sondh said.

Third,the drag on energy-intensive industries weakens."The improvement in energy fundamentals,such as the shift towards renewable energy and the diversification of energy suppliers,may help alleviate the energy supply challenges faced by companies next year."