Global Economic Outlook: Navigating Uncertainty
As the world approaches 2025, uncertainty looms over global economic dynamics. Ralph Ossa, the Chief Economist at the World Trade Organization (WTO), explains that the decisions we make this year will chart our course—either fostering a global trade landscape or risking further disruption. In his recent conversation on Radio Davos, Ossa highlighted that while geoeconomic fragmentation is emerging, it does not signify deglobalization.
Resilience Amid Challenges
According to Ossa, the global economy has shown remarkable resilience despite ongoing challenges. He noted, “After the pandemic, we had relatively stable growth in 2023-24… At the same time, the growth rate is still subdued, about one percentage point lower than in the 2010s.” This situation is compounded by high uncertainty, especially regarding the forthcoming U.S. administration’s policies.
Trade Patterns Shifting
Ossa emphasizes trade tensions, particularly between the U.S. and China, as a key focus. “Bilateral trade between China and the United States actually only accounts for less than 3% of world trade,” he stated, while also acknowledging their disproportionate media attention. He highlighted that shifts in trade patterns reflect geopolitical lines, indicating a trend of “friendshoring,” where trade among allied nations may increase, potentially diminishing reliance on politically diverse partners.
Tariffs and Economic Impact
Tariffs create complexities, as explained by Ossa. “There’s a large chunk of international trade that can be kept clear of these frictions,” he noted, citing that over 75% of global trade still follows WTO terms. However, he warns that unilateral tariffs aimed at protecting domestic industries could lead to higher consumer prices, creating a detrimental cycle that harms all involved nations.
Inflation vs. Deflation
Discussions of inflation have dominated recent economic discourse, with Ossa observing that ongoing price increases significantly affect households. He cautioned about the risk of deflation, particularly in China, mirroring Japan’s struggles in the 1990s, which could further destabilize global markets.
Broadening Economic Measures
Ossa suggests that traditional measurements like GDP, while still vital, do not capture the complete economic picture, including inequality and environmental impact. Despite these limitations, he states, “Economic success is crucial for success in many of the other important indicators.” He argues that leveraging the division of labor is essential for prosperity and that international trade is an extension of this fundamental principle.
Fostering Cooperation for Prosperity
The overarching message from Ossa is one of hope. He advocates for sustained cooperation among nations, emphasizing, “We are all better off cooperating and we are better off trading.” By avoiding isolationist tendencies, economies can thrive and navigate the complexities of a rapidly changing world, ensuring a more prosperous future for all.
According to Ralph Ossa, the Chief Economist at the WTO, the global economy stands at a crossroads in 2025. He emphasizes resilience despite lower growth rates and rising uncertainty due to geopolitical tensions and tariffs. Ossa suggests a focus on cooperation and trade control to foster prosperity, noting that tariffs may harm all economies involved. The path forward relies on crucial policy choices made today.
The global economy faces a pivotal moment as it navigates uncertainty and shifts in trade dynamics. Ralph Ossa’s insights shed light on the resilience of economic structures amidst potential disruptions from tariffs and geopolitical tensions. He advocates for cooperation over isolationism, highlighting that nations benefit more from trade, which, at its core, promotes collective prosperity. The path beyond 2025 hinges on the choices made today.
Original Source: www.weforum.org
