World Trade Expected to Slow Sharply in 2023: WTO

Geneva: World trade is expected to lose momentum in the second half of 2022 and remain subdued in 2023 as multiple shocks weigh on the global economy, the World Trade Organization (WTO) has said.
 
WTO economists now predict global merchandise trade volumes will grow by 3.5% in 2022—slightly better than the 3.0% forecast in April. For 2023, however, they foresee a 1.0% increase—down sharply from the previous estimate of 3.4%.
 
Import demand is expected to soften as growth slows in major economies for different reasons. In Europe, high energy prices stemming from the Russia-Ukraine war will squeeze household spending and raise manufacturing costs. In the United States, monetary policy tightening will hit interest-sensitive spending in areas such as housing, motor vehicles and fixed investment. China continues to grapple with COVID-19 outbreaks and production disruptions paired with weak external demand. Finally, growing import bills for fuels, food and fertilizers could lead to food insecurity and debt distress in developing countries.

"Policymakers are confronted with unenviable choices as they try to find an optimal balance among tackling inflation, maintaining full employment, and advancing important policy goals such as transitioning to clean energy. Trade is a vital tool for enhancing the global supply of goods and services, as well as for lowering the cost of getting to net-zero carbon emissions," WTO Director-General Ngozi Okonjo-Iweala said in a media release on Thursday.
 
"While trade restrictions may be a tempting response to the supply vulnerabilities that have been exposed by the shocks of the past two years, a retrenchment of global supply chains would only deepen inflationary pressures, leading to slower economic growth and reduced living standards over time. What we need is a deeper, more diversified and less concentrated base for producing goods and services. In addition to boosting economic growth, this would contribute to supply resilience and long-term price stability by mitigating exposure to extreme weather events and other localized disruptions. The success of the WTO's 12th Ministerial Conference (MC12) in June is proof that with sufficient political will, members can cooperate and move forward together," the WTO Chief explained.
 
The new WTO forecast estimates world GDP at market exchange rates will grow by 2.8% in 2022 and 2.3% in 2023 — the latter is 1.0 percentage points lower than what was previously projected.
 
If the current forecast is realized, trade growth will slow sharply but remain positive in 2023. It should be noted that there is a high degree of uncertainty associated with the forecast due to shifting monetary policy in advanced economies and the unpredictable nature of the Russia-Ukraine war. 

 
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