NEW YORK: Trade growth is expected to lose momentum in the second half of this year and remain subdued in 2023, as the global economy sustains multiple shocks, such as ripple effects from the war in Ukraine, according to the latest forecast from the World Trade Organization (WTO), a Geneva-based UN partner agency.
The agency has cautioned against imposing trade restrictions, which will ultimately result in slower growth and lower living standards.
Global merchandise trade volume is estimated to grow 3.5 per cent in 2022, or slightly better than the 3.0 per cent anticipated in April.
However, volume will slow to 1 per cent next year, a sharp decline from the 3.4 per cent previously estimated. Demand for imports is expected to weaken as growth slows in major economies for different reasons, WTO said.
The agency said the developing countries could face food insecurity and debt distress as import bills for fuels, food and fertilizers rose – another impact from the war in Ukraine.
Overall, energy prices jumped 78 per cent year-on-year in August, according to the forecast. Food prices increased 11 per cent, grain prices were up 15 per cent and fertilizer 60 per cent.
Many currencies had also fallen against the dollar in recent months, another factor that was making food and fuel more expensive.
In Europe, high energy prices resulting from the Russian invasion of Ukraine will squeeze household spending and raise manufacturing costs.
In the United States, monetary policy tightening will affect spending in areas where interest rates count, such as housing, motor vehicles and fixed investments.China also continues to struggle with COVID-19 outbreaks and production disruptions coupled with weak external demand.
Ngozi Okonjo-Iweala, the WTO Director-General, said policymakers faced “unenviable choices” as they tried to find an optimal balance among tackling inflation, maintaining full employment, and advancing important goals such as transitioning to clean energy.
She underscored how trade was a vital tool – both for enhancing the global supply of goods and services, as well as for lowering the cost to achieve net-zero carbon emissions.
“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,” she said.
“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.”
WTO said the Middle East would have the strongest export growth of any region this year, 14.6 per cent, followed by Africa, North America, Asia, Europe, and South America. –Agencies
