Multiple shocks to the world economy will cause a “sharp slowdown” in the rate of trade growth, according to the World Trade Organization.
Global merchandise trade volumes are forecast to grow by 3.5% in 2022, but trade growth is expected to slow to 1.0% in 2023.
Surging costs around the world caused by the invasion of Ukraine, tighter monetary policy (i.e. central banks hiking interest rates) hitting interest-sensitive spending in areas such as housing and vehicle-buying, soaring import bills for fuel, food and fertilizer, and broad-based inflation, along with China’s ongoing attempts to grapple with COVID outbreaks, have been identified as major drivers.
“Policymakers are confronted with unenviable choices as they try to find an optimal balance among tackling inflation, maintaining full employment, and advancing important policy goals such as transitioning to clean energy. Trade is a vital tool for enhancing the global supply of goods and services, as well as for lowering the cost of getting to net-zero carbon emissions,” Director-General Ngozi Okonjo-Iweala said.
“While trade restrictions may be a tempting response to the supply vulnerabilities that have been exposed by the shocks of the past two years, a retrenchment of global supply chains would only deepen inflationary pressures, leading to slower economic growth and reduced living standards over time. What we need is a deeper, more diversified and less concentrated base for producing goods and services. In addition to boosting economic growth, this would contribute to supply resilience and long-term price stability by mitigating exposure to extreme weather events and other localized disruptions”, the Director-General said.
The new WTO forecast has estimated that world Gross Domestic Product at market exchange rates will grow by about 2.8% this year and 2.3% next year. The new 2023 GDP forecast is one percentage point lower than the previous forecast.
Uncertain: volume of world merchandise trade, 2015Q1-2023Q4
Seasonally-adjusted volume index, 2015=100
Source: WTO and UNCTAD, WTO Secretariat estimates.
WTO merchandise trade growth forecasts for 2022
EXPORTS
- Middle East: 14.6%
- Africa: 6.0%
- North America: 3.4%
- Asia: 2.9%
- Europe: 1.8%
- South America: 1.6%
- CIS (Russia, Belarus and the central Asian nations): -5.8%
IMPORTS
- Middle East: 11.1%
- North America: 8.5%
- Africa 7.2%
- South America: 5.9%
- Europe: 5.4%
- Asia: 0.9%
- CIS: -24.7%
Source: WTO
Meanwhile, the global Purchasing Managers’ Index (an aggregate of PMIs from over 40 countries) has been trending downwards from April 2021 when it was at an index score of just over 55 points. The last data point, July 2022, touched 50.3 points. When the index falls below 50 points it indicates a contraction. “This suggests that global manufacturing activity has stalled, and that goods trade will continue to slow in the coming months”, the WTO points out.
Meanwhile, the RWI/ISL container throughput index, which tracks global goods trade, has been mostly flat since October 2020. “Overall, the index suggests continued stagnation in merchandise trade”, the WTO said.
At the tipping-point: Global Purchasing Managers Index
January 2018 – August 2022
