WTO forecasts rebound in global trade but keeps geopolitical risks in focus

The World Trade Organization on Wednesday said that it expects global trade to rebound gradually this year, before rising further in 2025, as the impacts of higher inflation fall into the rearview mirror.

In its latest "Global Trade Outlook and Statistics" report, the WTO forecast that total global trade volumes will increase by 2.6% in 2024, and by a further 3.3% in 2025. It follows a larger-than-expected 1.2% decline in 2023, as inflationary pressures and higher interest rates weighed on international trade.

"The reason for this pickup is basically the normalization of inflation and also the normalization of monetary policy, which has been a drag on trade in 2023," the WTO's chief economist Ralph Ossa told CNBC's Silvia Amaro.

The trade rebound is expected to be "broad-based," including across Europe, which experienced some of the deepest falls in trade volumes last year as a result of geopolitical tensions and the energy crisis caused by Russia's full-scale invasion of Ukraine.

"Europe was really weighing on international trade in 2023, and we don't see that being the case anymore," Ossa said.

Overall, world trade has been "remarkably resilient" over recent years, rising above its pre-Covid-19 pandemic peak in late 2023, the WTO report concluded. However, the organization warned that geopolitical tensions could still pose a risk to its outlook.

In particular, the ongoing war between Israel and Palestinian militant group Hamas could cause major trade disruptions, should it spill over into energy markets, Ossa said.

The economist also pointed to signs of global trade "fragmentation" along geopolitical lines.

The WTO report divided the global economy into two "hypothetical geopolitical blocks" based on U.N. voting patterns and