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WTO anticipates sharp slowdown in world trade growth in 2023

WTO anticipates sharp slowdown in world trade growth in 2023

Global trade growth loses momentum in the second half of this year and will remain weak in 2023 as multiple shocks weigh on the global economy, including fallout from the war in Ukraine, according to the latest forecasts from the World Trade Organization (WTO).

WTO Director-General Ngozi Okonjo-Iweala said that “policymakers are faced with very unenviable decisions, trying to find an optimal balance between fighting inflation, maintaining full employment and promoting goals such as the transition to clean energies.

The WTO, based in this Swiss city of Geneva, estimates that world merchandise trade will grow 3.5% in 2022, slightly more than the three percent forecast in April, but the volume will slow down to just one percent next year, which represents a sharp decrease compared to the previous estimate of 3.4%.

In 2021, world exports reached 22.3 billion dollars, of which more than eight billion corresponded to Asia (China is the world leader with 3.4 billion), and another eight billion to Europe, with Germany as a locomotive when exporting for 1.6 billion dollars.

North America exported $2.8 trillion, the Middle East $1.2 trillion, Central and South America about $600 billion, and Africa nearly $500 billion.

The Middle East will be the region with the highest export growth this year, 14.6%, followed by Africa, North America, Asia, Europe and South America, and also had the highest volume growth in imports, with 11.1 %.

In 2021, imports in the world totaled 22.5 billion dollars, with eight billion for both Europe and Asia, four billion for North America, close to 800 billion in the Middle East, more than 650 billion in Central America and South, and just over 500 billion in Africa.

Import demand is expected to weaken as growth in major economies slows for a variety of reasons, with the WTO estimating gross world product to grow 2.8% in 2022 and 2.3% in 2023, one percentage point lower than had been estimated in April.

In Europe, high energy prices resulting from the Russian invasion of Ukraine will reduce household spending and increase manufacturing costs.

In the United States, the tightening of monetary policy will affect spending in areas where interest rates count, such as housing, motor vehicles and fixed investments.

China continues to struggle with Covid-19 outbreaks and production disruptions, coupled with weak external demand.

Meanwhile, developing countries could face food insecurity and debt difficulties as import bills for fuel, food and fertilizer rise, another impact of the war in Ukraine.

August data recorded that energy prices soared 78% year-on-year, food prices increased 11%, cereals 15% and fertilizers 60%, all events associated with the conflict in Eastern Europe.

In addition, many currencies have fallen against the dollar in recent months, another factor that makes food and fuel more expensive.

But even with that scenario, “trade is a vital instrument to strengthen the global supply of goods and services, and to limit the cost of reducing net carbon emissions to zero,” Okonjo-Iweala said.

Economist and former Nigerian Finance Minister, Okonjo Iweala warned against imposing trade restrictions that would ultimately result in slower growth and lower living standards.

“While trade restrictions may be a tempting response to supply-side vulnerabilities that have been exposed by the shocks of the past two years, a reduction in global supply chains would only exacerbate inflationary pressures,” she said.

She added that “what we need is a deeper, more diversified and less concentrated base to produce 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 shocks,” she insisted.

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