Global Trade Growth To Slow To 1.7 Percent In 2023: WTO Report
Recently, the World Trade Organization published a statement that the global trade growth in 2023 would be somewhat better than feared, but would remain “inadequate” due to overloaded by the effects of the war in Ukraine, tighter monetary policy, stubbornly high inflation rates, and financial market uncertainty, as the reports said.
Remarking on their annual trade forecast, WTO financial experts said they expected global merchandise trade volume to slow to 1.7% this year - a full percentage point lower than in 2022.
That forecast was somewhat better than feared last October when the WTO estimated 2023 trade growth would be as low as one percent but distant from the 3.4% expansion initially forecasted a year ago.
A slight increase from the October forecast was majorly associated with China's loosening Covid pandemic controls, which according to WTO, was “expected to release suppressed consumer demand in the country, in turn enhancing intentional trade.”
“No doubt a pleasant finish to the war in Ukraine and the reduction of extensive geopolitical stress would also efficiently improve the perspective for the global economy,” WTO's chief economist Ralph Ossa stated.
He added that vulnerabilities recently uncovered in the banking sector posed risks, cautioning that “quickly increasing interest rates could create further complexities in financial markets, (with) suggestions for international trade.”
The WTO’s economists also predicted that real international GDP growth at market exchange rates would be 2.4% this year, a step over the 2.3% forecast in October.
“Trade continues to be a determining factor for flexibility in the global economy, but it will continue to struggle from external factors in 2023,” WTO chief Ngozi Okonjo-Iweala stated.
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The WTO’s report warned that “the speed of trade expansion in 2023 is still expected to be slow, over-burdened by the ongoing war in Ukraine, extremely high inflation, tighter monetary policy, and financial vulnerabilities.”
The organization stated that goods trade was more resilient than predicted for most of last year, irrespective of the critical downturn introduced by Russia’s war in Ukraine.
But in the end, trade growth marked at just 2.7% in 2022 - extremely lower than the 3.5% estimated last October - following a sharp fall in the fourth quarter, the WTO said.
It highlighted a few variables for the sheer dropping at the end of the year, including raised global commodity prices, monetary policy tightening in response to inflation, and outbreaks of Covid-19 that messed up production and trade in China.
Higher commodity prices assisted the value of world merchandise trade, rising 12% in 2022 to $25.3 trillion, as per WTO.
“The remaining effects of Covid-19 and the increasing geopolitical conditions were the main factors influencing trade and output in 2022, and this is probably going to be the case in 2023 as well,” Ossa said.
He warned that “an interest rate hike in developed economies has also uncovered vulnerabilities in banking systems that could cause wider financial instability if left unchecked.”
“Legislatures and controllers should be aware of these and other monetary risks in the upcoming months.”
Central banks have increased interest rates to control high inflation, but the higher borrowing costs increased fears about the status of the financial system following the breakdown of three US regional banks last month.
Okonjo-Iweala noted that the external pressures negatively affecting global trade made “it even more critical for governments to skip trade fragmentation and abstain from introducing hindrances in trade.”
She called rather for more multilateral cooperation on trade to “support economic development and people’s living standards over the long term.”
Looking forward, the WTO stated that trade growth in 2024 should bounce back to 3.2% while GDP picks up to 2.6%.
But it cautioned that “this prediction is more unsure than usual because of the presence of the significant drawback risks, including increasing geopolitical stress, international food vulnerabilities, the possibilities of unanticipated aftermaths from monetary tightening, risks to financial stability, and increasing levels of debts.”