WTO slashes global trade growth forecast for 2022 to 3% from 4.7%

Amiti Sen | | Updated on: Apr 13, 2022
Growth of world GDP at market exchange rates is expected to slow down to 2.8 per cent in 2022 after rising 5.7 per cent in 2021, the report said

Growth of world GDP at market exchange rates is expected to slow down to 2.8 per cent in 2022 after rising 5.7 per cent in 2021, the report said | Photo Credit: DENIS BALIBOUSE

Impact of the on-going Ukraine-Russia war, China’s Covid-19 lockdown creating uncertainties, disrupting supplies

The World Trade Organisation (WTO) has scaled down its projection for global trade growth (in volume) for 2022 to 3 per cent from 4.7 per cent predicted earlier following the outbreak of the Russia-Ukraine conflict that has impacted commodity prices, disrupted supplies and intensified geopolitical and economic uncertainty.

The Covid-19 related lockdown in China is another factor affecting growth prospects as it is hampering seaborne trade, according to the WTO’s latest report on trade statistics and outlook released on Tuesday.

“Prospects for the global economy have darkened since the outbreak of war in Ukraine, prompting WTO economists to reassess their projections for world trade over the next two years. The organisation now expects merchandise trade volume growth of 3 per cent in 2022 — down from its previous forecast of 4.7 per cent — and 3.4 per cent in 2023, but these estimates are less certain than usual due to the fluid nature of the conflict,” the report stated.

Growth of world GDP at market exchange rates is expected to slow down to 2.8 per cent in 2022 after rising 5.7 per cent in 2021, the report said. Output growth could increase to 3.2 per cent in 2023.

Global goods trade up

The volume of world goods trade rose 9.8 per cent in 2021 while in value terms (US $), it posted a 26 per cent increase to $22.4 trillion. The value of commercial services trade was also up 15 per cent in 2021 to $ 5.7 trillion.

While the year 2021 saw a sharp rebound in trade volumes after the pandemic-induced slump of 2020 with Asia, one of the leaders leading the show, in 2022 it is Asia that is expected to post one of the the lowest growth rate of 2 per cent, per the projections. This may be an area of concern for Indian exporters who performed well in 2021-22 with exports reaching an all time high of $413 billion growing at over 40 per cent compared to the previous year.

“The war in Ukraine has created immense human suffering, but it has also damaged the global economy at a critical juncture. Its impact will be felt around the world, particularly in low-income countries, where food accounts for a large fraction of household spending,” WTO Director-General Ngozi Okonjo-Iweala said.

Economic impacts

A sharp rise in commodity prices has been one of the immediate economic impacts of the crisis, the report said. “Despite their small shares in world trade and output, Russia and Ukraine are key suppliers of essential goods including food, energy, and fertilisers, supplies of which are now threatened by the war. Grain shipments through Black Sea ports have already been halted, with potentially dire consequences for food security in poor countries,” it said.

Services trade will also be affected by the conflict in Ukraine, including in the transport sector, which covers container shipping and passenger air transport.

China lockdown

Apart from the Ukraine war, the other big factor affecting prospects of world trade growth was the continued lockdowns in China to prevent the spread of Covid-19. This was 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,” the report cautioned.

The report projected a possible 12 per cent decline in imports in the CIS countries and a 7.9 per cent drop in GDP in 2022 because of the war. But due to continued purchases of oil from the region, including from Russia, by major economies including European countries, exports could grow by 4.9 per cent. Regional disparities may narrow due to weak import demand in Europe and Asia.

Published on April 12, 2022
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