Global trade growth will lose momentum in the second half of this year and remain meager in 2023 as multiple shocks weigh on the global economy, including fallout from the war in Ukraine, according to the latest World Trade Organization forecasts. (WTO).
The institution has warned against imposing trade restrictions that, ultimately, would translate into slower growth and lower living standards.
The volume of world merchandise trade is estimated to grow by 3.5% in 2022, slightly more than the 3.0% expected in April. However, the volume will slow to 1% next year, which is a sharp decline from the 3.4% previously estimated.
Import demand is expected to weaken as growth slows in major economies for a variety of reasons, according to the Organization.
In Europehigh energy prices resulting from the Russian invasion of Ukraine will reduce household spending and increase manufacturing costs.
In United Statesthe tightening of monetary policy will affect spending in areas where interest rates count, such as housing, motor vehicles and fixed investments.
China also still struggling with breakouts COVID-19 and production interruptions, coupled with weak external demand.
Concern for developing countries
In the meantime, The developing countries they could face food insecurity and debt difficulties as import bills for fuel, food and fertilizer rise – another impact of the war in Ukraine.
Overall, energy prices soared 78% year-on-year in August, according to forecasts. Food prices increased by 11%, cereals by 15% and fertilizers by 60%.
In addition, many currencies have fallen against the dollar in recent months, another factor that makes food and fuel more expensive.
The essential role of trade
Ngozi Okonjo-Iweala, director general of the World Trade Organization, said that policymakers face ‘unenviable choices’ trying to find an optimal balance between fighting inflation, maintaining full employment, and advancing important goals like the clean energy transition.
He underlined that trade is a vital tool, both to improve the global supply of goods and services and to reduce the cost of achieving net-zero carbon emissions.
high energy prices resulting from the Russian invasion of Ukraine will reduce household spending and increase manufacturing costs
Against trade restrictions
“While trade restrictions may be a tempting response to supply-side vulnerabilities that have been exposed by the shocks of the past two years, a reduction in global supply chains would only aggravate inflationary pressureswhich would lead to slower economic growth and lower living standards over time,” he said.
“What we need is a deeper, more diversified and less concentrated base for producing goods and services. As well as boosting economic growth, this would contribute to long-term supply resilience and price stability by mitigating exposure to extreme weather events and other localized disturbances.”
The WTO noted that The Middle East will be the region with the highest export growth this year, 14.6%, followed by Africa, North America, Asia, Europe and South America. The Middle East also had the highest trade volume growth on the import side, at 11.1%.
While the Middle East and Africa should see a small decline in exports in 2023, imports will remain strong.
The new forecasts, published on Wednesday, revise the estimates published in April, that is, a few weeks after the start of the war in Ukraine.
At that time, the economists of the UN-linked agency had to rely on simulations for their projections, in the absence of concrete data on the impact of the war.
