Exports are the lifeblood of the global economy. After years of steady growth, international trade has encountered significant obstacles. The recent unrest in the Middle East and Eastern Europe has altered global dynamics, resulting in decreased export figures. According to the World Trade Organization’s (WTO) Global Trade Outlook and Statistics report, total global trade declined by 1.2% in 2023 compared to the previous year. The WTO also reported that global merchandise exports fell by 5% to $24.01 trillion in FY 2023, which ended in April 2024.
Several factors contributed to this downturn, with the Russia-Ukraine war playing a significant role. The conflict has notably affected global crude oil prices, impacting the global oil and gas export rates. Additionally, the Israel-Palestine conflict has exacerbated the situation. These conflicts, combined with increasing attacks by the Houthis and Somali pirates in the Red Sea, have disrupted the global supply chain, affecting the cost and availability of goods worldwide. The US Maritime Administration reported that the Houthis attacked more than 20 ships since 2023, resulting in the deaths of three sailors, the seizure of one vessel, and the sinking of another.
Consequently, ships have become reluctant to enter this region, disrupting the supply chain. However, the situation is now under the control of regional authorities. That being said, experts believe that Houthis can change the tides once again and start attacking ships as the Palestine war is still at its peak.
Another contributing factor is the decrease in global demand. Countries like the United States and Britain have been battling high inflation rates, reducing demand. Between 2000 and 2020, the inflation rate in the USA was at most 2.5%. However, post-COVID-19, the inflation rate has remained above 3%, severely impacting citizens’ purchasing power and demand for goods. Similarly, the United Kingdom is experiencing a recession. The nation’s GDP has stagnated since 2022, with negative growth in the 3rd and 4th quarters of 2023. This has driven the cost of living to record highs, further reducing demand. According to the WTO, global merchandise exports have consistently declined since 2021.
India has also experienced a decline in global exports. The growth of Indian exports fell to a mere 1.5%, from $776 billion in FY 2022-2023 to $778 billion in FY 2023-2024, significantly lower than the previous year’s growth of 13.84%. The average growth rate of India’s exports over the last decade (FY 2014-2024) was 5.2%, compared to 13.9% in the previous decade (FY 2004-2014). Exports accounted for 21.3% of India’s GDP in FY 2014-2024, down by 2.8% from the previous decade.
The Indian agriculture sector also saw a decline in exports. According to data from the Ministry of Commerce and Industry and the Reserve Bank of India (RBI), agricultural exports fell from $53.12 billion in 2023 to $48.9 billion in 2024. Notably, agricultural exports were valued at $42.6 billion in 2014. Over the decade (FY 2014-2024), agricultural exports grew by 1.1 times, while the GDP grew by 1.8 times. Moreover, India’s merchandise exports also show a downgrade. As per the data released by the Commerce Ministry of India, the country saw a 3.1% contraction in merchandise exports.
The WTO and the International Monetary Fund (IMF) forecast that global trade will return to full capacity in 2024. According to the WTO, global merchandise trade volume is expected to increase by around 2.6% in 2024. The IMF also projects that global trade in goods and services will grow by 3% in 2024. This optimistic outlook is attributed to anticipated reductions in inflation rates in the United States and Europe. Additionally, many experts believe that the global supply chain will adapt to changes induced by recent conflicts, leading to a rebound. Demand is expected to rise as inflation rates decrease, allowing the global economy to recover to pre-pandemic levels.
