It's gonna get worse: WTO slashes trade growth to 3%

The World Trade Organization (WTO) has almost halved its growth rate prediction from 4.7% to 3% for 2022. The prime reason is the Russia-Ukraine war, but there are other reasons too.

Long Story, Cut Short
  • World GDP at market exchange rates is expected to increase by 2.8% in 2022 after rising 5.7% in 2021.
  • Output growth should pick up to 3.2% in 2023, assuming persistent geopolitical and economic uncertainty.
  • Lockdowns in China to prevent the spread of COVID-19 are again disrupting seaborne trade at a time when supply chain pressures appeared to be easing.
Prospects for the global economy have darkened since the outbreak of war in Ukraine on 24 February, prompting WTO economists to reassess their projections for world trade over the next two years.
On a Slow Trajectory Prospects for the global economy have darkened since the outbreak of war in Ukraine on 24 February, prompting WTO economists to reassess their projections for world trade over the next two years. Hector Galarza / Pixabay

The Russia-Ukraine war has thrown all predictions made at the turn of the year out of the window. The World Trade Organization (WTO) now expects merchandise trade volume growth of 3.0% in 2022down from its previous forecast of 4.7%—and 3.4% in 2023, but these estimates are less certain than usual due to the fluid nature of the conflict.

The predictions made by WTO economists were announced on Tuesday.

The highlights 

  • World GDP at market exchange rates is expected to increase by 2.8% in 2022 after rising 5.7% in 2021. Output growth should pick up to 3.2% in 2023, assuming persistent geopolitical and economic uncertainty.
  • The CIS region should see a 12.0% decline in imports and a 7.9% drop in GDP in 2022, but exports should grow by 4.9% as other countries continue to rely on Russian energy. Regional disparities may narrow due to weak import demand in Europe and Asia.
  • The volume of merchandise trade rose 9.8% in 2021. The US$ value of this trade grew 26% to US$ 22.4 trillion. The value of commercial services trade was also up 15% in 2021 to US$ 5.7 trillion.
  • Services trade will also be affected by the conflict in Ukraine, including in the transport sector, which covers container shipping and passenger air transport.

The reasons: The war is not the only factor weighing on world trade at the moment, a WTO release said. Lockdowns in China to prevent the spread of COVID-19 are again disrupting seaborne trade at a time when supply chain pressures appeared to be easing. This could lead to renewed shortages of manufacturing inputs and higher inflation.

History teaches us that dividing the world economy into rival blocs and turning our backs on the poorest countries leads neither to prosperity nor to peace. The WTO can play a pivotal role by providing a forum where countries can discuss their differences without resorting to force, and it deserves to be supported in that mission.

Ngozi Okonjo-Iweala
Director-General
World Trade Organization
Ngozi Okonjo-Iweala
 
 
  • Dated posted: 12 April 2022
  • Last modified: 12 April 2022