WTO halves global trade growth forecast

The World Trade Organization (WTO) forecasts global trade growth in 2023 to reach only 0.8%, half of what it was before.

In April, the WTO said global trade growth could reach 1.7% this year. However, rising interest rates have dampened consumer spending in the U.S., Europe and Asia, prompting the 164-member organization to sharply revise down its forecast. Other headwinds include a tense Chinese real estate market and conflict in Ukraine.

The WTO said the trade downturn was broad-based, affecting a wide range of goods, notably iron and steel, office and telecommunications equipment, and textiles. The notable exception was cars, where sales have surged this year.

In an interview with The Guardian on October 5, International Monetary Fund (IMF) Managing Director Kristalina Georgieva assessed that there has been progress in the fight against inflation but the risk of high interest rates still persists.

“This is not done yet and it raises questions about the ability of high interest rates to persist, certainly into 2024 and possibly into 2025. So the growth outlook is weak and financial conditions are tighter,” she said.

Yangshan Deepwater Port in Shanghai, China on October 19, 2020. Photo: Reuters — Yangshan Deepwater Port in Shanghai, China on October 19, 2020. Photo: *Reuters*

In Europe, the bloc’s largest exporter, Germany, continued to underperform. Exports fell 1.2% in August, while imports fell 0.4%, according to data from the German statistical office (Destatis). The trade slump raises the risk that the German economy will fall back into recession in the third quarter of this year, analysts at ING said.

The WTO’s trade forecasts are similar to those of the IMF and World Bank ahead of their autumn meetings in Marrakech, Morocco, next week. Both are likely to cut their global growth forecasts amid signs that central banks will keep interest rates high for longer to curb inflation.

An optimistic assessment by the Washington-based Peterson Institute said that most of the world economy will recover strongly next year, after inflation falls again, creating conditions for lower interest rates and boosting growth.

After reaching 3.4% in 2022, global GDP growth is forecast to be 3% this year and 2.8% in 2024. The WTO said GDP next year will be supported by trade growth of 3.3%, unchanged from its April forecast.

While the WTO acknowledged signs of trade conflicts around the world, leading to sanctions and blockades, it said there was no evidence of a broader trend of deglobalization that could threaten its 2024 forecast.

WTO Director-General Ngozi Okonjo-Iweala said the slowdown in trade was worrying because it could reduce living standards, especially in poor countries. "The fragmentation of the global economy will make these challenges worse," she said.

The WTO's forecast does not include services, but the organization said growth in this sector is also slowing after a strong recovery in international tourism in 2022. Specifically, global services grew by 9% in the first quarter of 2023, down from 19% in the second quarter of 2022.

Phien An ( according to The Guardian )

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