Economy

Middle East exports to rebound as Red Sea fears ease

April 11, 2024, 4:44 AM

The impact on shipping through the Suez Canal has been less severe than feared, says the WTO

Exports to rise 3.5%
Suez shipping down 45%
UAE world’s 14th largest exporter

Middle East goods export volumes, which include oil and gas, will expand 3.5 percent this year, the World Trade Organization predicts, adding that disruptions to Red Sea maritime trade are proving less severe than feared.

The WTO’s Global Trade Outlook and Statistics report, published on Wednesday, says this expected increase contrasts with a 1.6 percent decline in Middle East goods exports in 2023, the third annual contraction in the past four years. This period includes pandemic-affected 2020 and 2021.

Other regions are also likely to prosper in 2024. Goods exports volumes are likely to surge 5.3 percent in both Africa and the former Soviet republics – known as the Commonwealth of Independent States – while those from North America will expand 3.6 percent.

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“We are making progress towards global trade recovery, thanks to resilient supply chains and a solid multilateral trading framework,” WTO director-general Ngozi Okonjo-Iwea said in a statement accompanying the report.

The Middle East’s GDP at market exchange rates will expand 2.7 percent in 2024 and 3.4 percent next year, eclipsing 2023’s growth of 1.6 percent, the WTO predicts.

The region’s goods volumes imports will grow 1.2 percent in 2024, a marked slowdown from 2021 to 2023, when these expanded by 10 percent or more.

Suez shipping

Around 15 percent of global trade passes through the Red Sea and 12 percent through the Suez Canal’s northern exit, the WTO estimates.

Since mid-November Yemen’s Ansar Allah group, widely referred to as Houthis, have attacked Israel-linked ships in the Red Sea in response to the Gaza conflict.

The WTO believes the impact of the Houthis’ actions “may be more limited than initially feared”.

It cites the ongoing use of the Suez Canal; relatively small delays re-routing shipping around Africa’s Cape of Good Hope; moderate consumer demand and sufficient inventories; manageable freight cost; stable energy markets and an improved availability of shipping capacity compared with the period of the Covid-19 pandemic.

Nevertheless, the monthly volume of ships passing through the Suez Canal was down 45 percent year on year to 264 in February, while the number of ships travelling around Africa's southern tip more than doubled.

The Red Sea disruptions have the greatest impact on Asia-Europe maritime trade, increasing journey distances by about 55 percent. This, on average, has added 17 days to transportation times.

After months of decline freight tariffs more than trebled from November 2023 to February 2024 but are now still less than one-third of those following the blockage of the Suez Canal by the ship Ever Given in March 2021, the WTO estimates.

The UAE exported $488 billion of goods in 2023, giving it a 2.1 percent global market share and ranking the country 14th worldwide. The UAE is a major re-exporter.

Saudi Arabia was 25th with $322 billion in goods exports and Turkey was 29th with $256 billion.

In terms of goods imports, the UAE’s $449 billion placed it 16th worldwide, while Turkey was 20th with $362 billion.

Global GDP at market exchange rates will expand 2.6 percent in 2024 and 2.7 percent in 2025, the WTO forecasts. It estimates the world economy grew 2.7 percent last year.

“The contrast between the steady growth of real GDP and the slowdown in real merchandise (goods) trade volume is linked to inflationary pressures, which had a downward effect on consumption of trade-intensive goods, particularly in Europe and North America,” the report adds.

The value of global goods exports was $24 trillion in 2023, down 5 percent versus a year earlier, according to the WTO. In contrast, services exports rose 9 percent to $7.5 trillion over the same period.