WTO slashes forecast for merchandise trade growth in 2023

GLOBAL merchandise trade will slow next year as “multiple shocks” ranging from Russia’s war in Ukraine, high energy costs in Europe and US monetary policy tightening raise manufacturing costs and squeeze households, the World Trade Organization said.

The Geneva-based trade body raised its projection for growth in merchandise trade this year to 3.5%, up from its previous projection of 3%, according to a report released on Wednesday (Oct 5). But the WTO said it expects trade growth to fall precipitously in 2023 to 1%, from its previous forecast of 3.4%

The WTO’s forecasts – which are in line with IMF and OECD projections – mark a significant deceleration from last year’s 9.7% growth in global trade. That was fuelled by consumer purchases of household items, while travel and other service industries were limited during the depths of the Covid pandemic.

In addition to the economic risks facing the US and Europe, the WTO said poor nations stand to suffer, too. “The growing import bills for fuels, food and fertilisers could lead to food insecurity and debt distress in developing countries,” it said.

The WTO acknowledged the tradeoffs governments are grappling with to bring soaring prices down by raising interest rates without too much collateral damage. 

“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,” WTO Director-General Ngozi Okonjo-Iweala said in a news release. 

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She cautioned against a retrenchment in global supply chains, saying such moves will only worsen inflationary pressures and slow economic growth. “What we need is a deeper, more diversified and less concentrated base for producing goods and services.” she said. BLOOMBERG