Dr. Perc Pineda Global Economic Outlook and Plastics Trade
Global trade prospects are significantly influenced by the global economic outlook. The state of the global economy plays a crucial role in shaping international trade dynamics and determining the growth and opportunities for industries and economies around the world. For the U.S. plastics industry, the world serves as the market. With the International Monetary Fund revising its global economic outlook, this has implications for the global plastics trade.
The recent revision by the International Monetary Fund (IMF) indicates that world output is expected to grow by 3.0% this year, which represents a 20-basis point increase from its earlier forecast in April. However, it is essential to note that this upward revision still suggests a weaker global economic growth compared to the previous year, 2022. As we enter the second half of 2023, businesses planning for the next six-to-twelve-month cycle must carefully consider the economic outlook for 2024.
According to the IMF’s growth revisions, the global economy is anticipated to remain relatively stable from 2023 to 2024 but indicating a sideways movement. This projection has implications for the global plastics trade as well. While the industry can still expect growth opportunities in 2023, the subdued economic outlook for 2024 might pose some trade-related concerns.
Global growth matters for trade.
The IMF recently revised its forecast for world trade volume for goods and services, lowering it from 2.4% to 2.0% for the year 2023. This indicates that global trade is expected to be less robust than previously projected for this year, suggesting some economic challenges and uncertainties in the international trade landscape. However, there is optimism for the following year, as the IMF anticipates an upturn in global trade volume, revising the forecast for 2024 from 3.5% to 3.7%. This indicates a potential recovery and growth in trade opportunities for industries worldwide, including the U.S. plastics industry.
In contrast, the World Trade Organization’s projection in April suggested a slower growth rate of 1.7% for global merchandise trade in the current year, highlighting the cautious outlook for international trade dynamics.
The trade data from January to May indicate a decline in the dollar value of plastics materials, resin, and plastics products exports, which decreased by 5.4% compared to the same period last year. Similarly, imports in the same category experienced a more substantial decrease of 20.3% during the same period. These declines align with the trend observed in the monthly Import Price Index for plastics and related articles, which has been consistently decreasing year-on-year during the first half of 2023. It is noteworthy that the Index experienced an increase starting in January 2021 and remained elevated for twelve months before the current decrease.
Uneven plastics trade outlook
Despite the upward revision in the global economic outlook, the growth of the plastic trade is likely to be uneven. Based on the PLASTICS Global Plastics Ranking®, China, the U.S., and Germany hold the top three positions in the global plastics trade. However, their economic performance is projected to differ in 2023.
The U.S. economy is expected to grow by 1.8% this year, while China’s is anticipated to experience stronger growth at 5.2%. In contrast, Germany is projected to face a decline of 0.3% in its economic output in 2023. This variation in economic growth among these key players will impact their respective plastic trade volumes and dynamics.
For the U.S. plastics industry, two crucial export markets to watch are Mexico and Canada. Mexico, which is the largest U.S. export market for plastics and plastic products, is now projected to grow by 2.6% this year—an upward revision from the previous forecast of 1.8% growth. Similarly, Canada, the second-largest market for U.S. plastics and plastic products, is expected to grow by 1.7%, up from the previously expected 1.5% output increase. However, looking ahead to 2024, with a flat global growth prospect and Mexico and Canada projected to grow at 1.5% and 1.4%, respectively, the U.S. plastics industry may experience weaker export growth compared to this year. Nevertheless, trade volume could be influenced by lower prices. If the U.S. dollar remains stable but below its highs from 2022, U.S. export, to some extent, could experience a global advantage.
