World trade growth will lose momentum in the second half of 2022 and suffer a “sharp slowdown” in 2023, according to new projections from the World Trade Organization (WTO), released on Wednesday (05.10.2022). This will happen due to the numerous disturbances affecting the global economy.
WTO economists predict that world merchandise trade volumes will grow by 3,5% in 2022, slightly above the 3% forecast in April, although for 2023 they anticipate an increase of 1%, which represents a sharp drop from 3,4% previously planned.
Meanwhile, world GDP at market exchange rates will grow by 2,8% in 2022 and by 2,3% in 2023, which is a one percentage point downgrade from the previous growth estimate, released shortly after the start of the invasion of Ukraine, which has proven overly optimistic for 2023 as energy prices have soared, inflation has become more widespread and the war shows no sign of abating.
According to the WTO, the Middle East will record the highest growth in exports this year exportis (14,6%), followed by Africa (6%), North America (3,4%), Asia (2,9%), Europe (1,8%) and South America (1,6%)In contrast, exports from the Commonwealth of Independent States (CIS) are expected to decline by 5,8% annually.
The Middle East also records the fastest growth in trade volume in terms of imports.imports (11,1%), followed by North America (8,5%), Africa (7,2%), South America (5,9%), Europe (5,4%), Asia (0,9%), while in the CIS they fell by 24,7%.
b. Refers to the average of exports and imports.
c. It includes Central and South America and the Caribbean.
d. It comprises the Commonwealth of Independent States (CIS), including certain former Member States and associate Member States.
Note: These forecasts incorporate mixed data sampling (MIDAS) techniques for selected countries to take advantage of higher frequency data such as container traffic and financial risk indices.
Source: WTO for trade data and consensus estimates for GDP.
Demand for imports will be mitigated because growth will slow in the main economies for different reasons. In Europe, the high prices of the Energy due to the war will reduce household spending and raise manufacturing costs, while in the United States, the tightening of the monetary politics will affect spending on housing, the automobile sector and fixed investment.
The rate hikes that the main central banks are carrying out to contain inflation, if carried out excessively, could also "trigger a recession in some countries, which would negatively affect imports" as well as "a flight of capital from emerging economies."
The WTO notes that China keep dealing with Covid-19 outbreaks and disruptions in production, coupled with weak external demand.
In addition, rising import bills for fuel, food and fertilizers could lead to food insecurity and over-indebtedness in developing countries.
Despite this downward revision, the WTO has stressed that, if current forecasts are met, trade growth will remain positive in 2023, although it has warned that due to the reorientation of monetary policy in advanced economies and the unpredictable nature of the war between Russia and Ukraine, the forecast is accompanied by a high degree of uncertainty.
“Policymakers face unenviable choices as they try to strike the optimal balance between combating inflation, maintaining full employment and promoting important goals such as the transition to clean energy,” said WTO Director-General Ngozi Okonjo-Iweala, who believes trade is a vital tool to limit the cost of reducing net carbon emissions to zero.
For the WTO director, although trade restrictions may be a tempting response to the supply vulnerabilities manifested by the disruptions of the past two years, “A rollback of global supply chains would only exacerbate inflationary pressures”, which would lead, over time, to a slowdown in economic growth and lower standards of living.
In this sense, the director stressed: "what What we need is a broader, more diversified and less concentrated base for producing goods and services.. In addition to boosting economic growth, this would contribute to long-term supply resilience and price stability by mitigating exposure to extreme weather events and other localized shocks.”
The WTO report also detailed the increase in international prices of the main commodities: energy prices rose 78% year-on-year in August, food prices 11%, cereals 15%, and fertilizers 60%.
Meanwhile, the WTO estimates that the world's Gross Domestic Product (GDP) will expand by 2,8% in 2022 and 2,3% in 2023, slightly less than the 3,2% and 2,9% forecast by the International Monetary Fund (IMF).WTO Press Release)
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