wto: WTO cuts 2023 trade, GDP forecast on Ukraine war, inflation, monetary tightening



The World Trade Organization on Wednesday raised the global merchandise trade volumes will grow by 3.5% in 2022—slightly better than the 3% forecast in April. However, it lowered the forecast to 1% for 2023, from the previous estimate of 3.4% as spiralling energy prices, rising interest rates and higher bills for food and fertiliser curb import demand.
“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 Geneva-based organisation said.
It also said that world GDP at market exchange rates will increase by 2.8% in 2022 and lowered the forecast for 2023 to 2.3% from 3.2% earlier.

“Trade and output will be weighed down by several related shocks, including the war in Ukraine, high energy prices, inflation, and monetary tightening,” it said.

Highlighting the 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, the WTO said that trade growth in 2022 could end up between 2% and 4.9% if current assumptions hold.
“However, if the downside risks materialize, trade growth in 2023 could then be as low as -2.8%,” it cautioned, adding that trade growth next year could be high as 4.6% if the “surprises are on the upside”.
As per the Geneva-based organisation, growing import bills for fuels, food and fertilizers could lead to food insecurity and debt distress in developing countries.
Middle East is expected to record the strongest export growth of any WTO region this year at 14.6%, followed by Africa at 6%, North America at 3.4%, Asia 2.9%, Europe 1.8% and South America
1.6%.
“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,” said WTO Director-General Ngozi Okonjo-Iweala.
As per the report, because of changes in prices, merchandise trade values are growing at double digit rates even as trade growth in volume terms remains in the low single digits.
“What we need is a deeper, more diversified and less concentrated base for producing goods and services,” Okonjo-Iweala said.
Exports of travel and transport services rebounded strongly in many countries as pandemic-related restrictions have eased. China is an exception, with travel spending held back by the country’s zero-COVID policy.
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