Throughout 2023, global trade was volatile as importers faced several challenges, including economic uncertainty and tight monetary policies.
Now, as 2024 begins, we are all looking ahead to see which market forces will continue impacting global trade. I wanted to share with you some of the factors I am closely monitoring that could shape the international trading market over the next several months.
Global Economy
Global economic growth started to soften in 2023 and, according to analysts, we can expect this slowdown to continue through 2024.
In their October 2023 World Economic Outlook report, the International Monetary Fund (IMF) forecasted global economic growth to slow to 2.9% in 2024, down from 3% in 2023. This projected growth is well-below the historical global GDP growth average of 3.8%. IMF analysts cited factors such as tight monetary policies, elevated inflation rates and global conflict as factors contributing to an economic slowdown.
In Latin America specifically, IMF says that we should expect regional economic growth to be flat year-over-year in 2024, with a forecasted growth rate of 2.3%. However, this growth rate marks a 0.1% upward revision from their July report, suggesting we can expect to see a slightly more positive outlook for Latin American economies moving into this year.
Image Courtesy of IMF
Global economic activity can heavily impact manufacturing demand and material sourcing strategies. Slow economic growth, for example, may prompt manufacturers to consider importing raw materials to reduce production costs, so we may see an increase in imports across Latin America during this time.
Inflationary Pressure
Inflation rates were historically high at the start of 2023, but gradually softened as the year went on. While analysts say we can expect inflation to soften further this year, rates may not return to target until 2025.
In their October 2023 report, IMF stated that global inflation is forecast to decline to 5.8% in 2024 from 6.9% in 2023 due to tighter monetary policies and lower commodity prices. In Brazil and Mexico, we saw inflation rates soften to 4.68% and 4.32% during November 2023, respectively, and these rates are expected to soften further within the next year.
Elevated inflation rates have significantly impacted economic growth over the past couple of years, which is why this is an area I am currently monitoring.
Interest Rates & Fiscal Policy
Economies across the globe have enacted tight monetary policies in an effort to bring down inflation throughout 2023.
However, we saw this trend begin to change in late 2023. In their December 2023 policy meeting, Brazil’s central bank lowered its benchmark interest rate by 50 basis points to 11.75%. The central bank signaled that it would do the same in January 2024 and that we could see cuts continue in the near term. Meanwhile, Mexico’s central bank held interest rates steady at their December meeting, and analysts do not expect the country to start making interest rate cuts until mid-2024.
Either way, analysts expect rates to be cut in 2024 as we see inflation rates continue to soften. Interest rates and central bank monetary policies impact both business and consumer spending, and, therefore, demand for goods.
Navigate Imports & Global Trade with a Trusted Trading Partner
Global trade can be challenging to navigate, which is why it is important for manufacturers to work with a trusted trading partner who can help them source the raw materials they need, especially during volatile markets.
With 60 years of combined experience in procurement and trading, Leeco Trading’s experienced team is ready to leverage its industry insights and supplier relationships to provide competitive, high-quality trading solutions for the raw materials you need.
Contact Leeco Trading today to discuss your next project with a knowledgeable representative.
