World Trade Organisation (WTO) economists said in a new forecast that global trade growth in 2023 is still expected to be subpar despite a slight upgrade to GDP projections since last fall.
In fact, weighed down by the effects of the war in Ukraine, high inflation, tighter monetary policy and financial market uncertainty, the volume of world merchandise trade is expected to grow by 1.7% this year, following 2.7% growth in 2022, a smaller-than-expected increase that was pulled down by a sharp slump in the fourth quarter.
The WTO’s trade projections, set out in the new “Global Trade Outlook and Statistics” report, estimate real global GDP growth at market exchange rates of 2.4% for 2023.
Moreover, projections for both trade and output growth are below the averages for the past 12 years of 2.6% and 2.7% respectively, according to the report.
WTO director-general Ngozi Okonjo-Iweala commented, “Trade continues to be a force for resilience in the global economy, but it will remain under pressure from external factors in 2023.”
He added, “This makes it even more important for governments to avoid trade fragmentation and refrain from introducing obstacles to trade. Investing in multilateral cooperation on trade, as WTO members did at our Twelfth Ministerial Conference last June, would bolster economic growth and people’s living standards over the long term.”
Additionally, the 2.7% increase in world trade volume in 2022 was weaker than the WTO’s October forecast of 3.5%, as a sharper-than-expected quarter-on-quarter decline in the last quarter dragged down growth for the year.
Notably, trade growth last year turned out to be in line with the 2.4% to 3.0% baseline scenario in the WTO’s March 2022 initial report on the war in Ukraine, and well above its more pessimistic scenario in which trade would have grown just 0.5% as countries started to split into competing economic blocs.
Furthermore, the 1.7% forecast for trade growth in 2023, meanwhile, is up from the previous estimate of 1.0% from last October.
Looking ahead to 2024, trade growth should rebound to 3.2%, as GDP picks up to 2.6%, but this estimate is more uncertain than usual due to the presence of substantial downside risks, including geopolitical tensions, food supply shocks, and the possibility of unforeseen fallout from monetary tightening.
