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WTO cuts 2022 trade forecast on Russia-Ukraine war, Covid-19
The World Trade Organization on Tuesday slashed its forecast for global trade growth this year to 3% from 4.7% due to the impact of the Russia-Ukraine war and warned against the global economy dividing into rival blocs because of the conflict.
While Western sanctions on Russian businesses and individuals are likely to have a strong effect on commercial services trade, lockdowns in China to prevent the spread of Covid-19 are disrupting seaborne trade which could lead to renewed shortages of manufacturing inputs and higher inflation.
The Geneva-based body said that global trade growth in 2023 is expected to be 3.4%, noting that these estimates are less certain than usual due to uncertainty about the ongoing conflict.
“Prospects for the global economy have darkened since the outbreak of war in Ukraine on February 24, prompting WTO economists to reassess their projections for world trade over the next two years,” the WTO said.
The most immediate economic impact of the crisis has been a sharp rise in commodity prices. Despite their small shares in world trade and output, Russia and Ukraine are key suppliers of essential goods including food, energy, and fertilizers, supplies of which are now threatened by the war, according to the organisation.
It said grain shipments through Black Sea ports have already been halted, with potentially dire consequences for food security in poor countries.
“Smaller supplies and higher prices for food mean that the world's poor could be forced to do without,” said WTO Director-General Ngozi Okonjo-Iweala, terming the situation a “double whammy” from the conflict and the coronavirus.
The WTO said its projections for world trade take into account factors like the impact of the war, sanctions on Russia, and lower demand around the world from lower business and consumer confidence.
Under these assumptions, world GDP at market exchange rates is expected to grow by 2.8% in 2022, down 1.3 percentage points from the previous forecast of 4.1%. Growth should pick up to 3.2% in 2023, it said.
“Restricting trade will threaten the wellbeing of families and businesses and make more fraught the task of building a durable economic recovery from Covid-19,” Okonjo-Iweala said.
Trade costs should rise in the short run as a result of sanctions, export restrictions, energy costs and disruptions in transport due to Covid-19.
As per the report, 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.
The forecast foresees 2022 export volume growth of 3.4% in North America, -0.3% in South America, 2.9% in Europe, 4.9% in the CIS, 1.4% in Africa, 11.0% in the Middle East, and 2% for Asia
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