WTO lowers 2023 global trade growth forecast to 0.8%

On October 5, the World Trade Organization (WTO) cut its forecast for global trade growth this year by half due to issues such as persistent inflation, rising interest rates, China's tense real estate market and conflict in Ukraine.

According to Reuters , the WTO estimates that merchandise trade volume will increase by 0.8% in 2023, lower than its previous forecast. In April, the organization forecast a growth of 1.7%.

Meanwhile, the WTO predicts that merchandise trade volumes will increase by 3.3% in 2024, a forecast that is largely unchanged from the 3.2% forecast it made in April.

The WTO forecasts that world real gross domestic product (GDP) will grow by 2.6% (at market exchange rates) this year and 2.5% in 2024.

Sectors more sensitive to the business cycle are expected to stabilize and recover as inflation moderates and interest rates begin to decline.

The WTO forecast does not include services trade, but preliminary data suggests growth in that sector may be more modest after a strong recovery in the transport and travel sectors last year.

The WTO said the trade slowdown was widespread, affecting many countries and many products, especially iron and steel, office and telecommunications equipment, and textiles. In contrast, automobiles were a notable exception, with sales rising this year.

In its latest report, the WTO said the continued decline in merchandise trade starting in the fourth quarter of 2022 has forced its economists to lower their trade forecasts for this year.

WTO chief economist Ralph Ossa said the positive growth trend in import and export volumes will continue into 2024, but the world must remain vigilant.

The report acknowledged that the exact causes of the trade slowdown are unclear, but that runaway inflation, high interest rates, a rising US dollar and geopolitical tensions are all contributing factors.

The WTO went on to warn that there were some signs of “trade fragmentation” linked to global tensions, but said there was no evidence of widespread “de-globalization” – which could impact its 2024 forecast.

Another sign is that the share of intermediate goods in world trade (an indicator of global supply chain performance) fell to 48% in the first half of 2023, down from an average of 51% in the previous three years. The WTO said it was unclear whether the decline was due to geopolitical tensions or a general economic slowdown.

WTO Director-General Ngozi Okonjo-Iweala predicted that the decline in trade would cause many concerns, because it could reduce living standards for people around the world, especially in poor countries.

“Global economic fragmentation will only make these challenges worse,” said Ms. Okonjo-Iweala.

Minh Hoa (reported by Tuoi Tre, Vietnam+)

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