World trade is idling. The forecasts released yesterday by the World Trade Organization (WTO) suggest that the volume of merchandise will barely grow by 1.7% in 2023. It is a result that the organization dismissed as "mediocre" and that, in effect, is is below the average of 2.6% registered during the last 12 years. At the same time, the WTO forecasts world GDP growth, at real exchange rates, to be 2.4%.
The reasons for the slowdown in trade growth are well known: inflation, the tightening of monetary policy with rising interest rates, geopolitical tensions, food insecurity and the risks arising from the war in Ukraine. The covid restrictions are no longer a serious threat. In fact, the WTO improved its October forecasts yesterday – which placed world trade growth at just 1% during 2023 – because China has relaxed pandemic control measures.
These threats should subside next year, when the WTO forecasts merchandise trade growth to pick up to 3.2% as economic expansion picks up and China fully reopens its borders. The body's forecasts do not cover services, but the WTO said international tourism was on the way to a full recovery and travel demand did not appear to have been affected by economic uncertainty.
Despite this, the director general, Ngozi Okonjo-Iweala, warned yesterday that “trade will continue to be subject to pressure from external factors. For this reason, it is even more important that governments avoid fragmenting trade and refrain from introducing barriers. Investing in multilateral cooperation in the field of trade would strengthen economic growth and people's living standards in the long term,” she said.
The WTO also alerted rich countries to a possible food crisis that could trigger famine in low-income countries. Among the risk factors are planting in Ukraine, one of the main cereal producers, floods or drought caused by climate change. African smallholder farmers in particular need affordable fertilizer to increase their production. In this sense, Okonjo-Iweala stated that it is vital to reduce obstacles and limit restrictions on food exports. In fact, some 35 countries have imposed 100 restrictions on food and fertilizer since Russia invaded Ukraine in February 2022. These restrictions eased in mid-2022, but have since risen to 67 by early April 2023.
Despite the unfavorable situation, the value of commercial transactions is skyrocketing due to inflation. In this sense, it contrasts the 2.7% growth registered in 2022 with the 12% increase in the value of merchandise, which reached 25.3 billion dollars (about 23.2 billion euros). As for the value of trade in services, this also shot up 15% annually, to 6.8 billion dollars (around 6.2 billion euros).
