WTO Anticipates Sharp Slowdown in World Trade Growth in 2023

Global trade growth will slow down in the second half of 2022, according to predictions from the World Trade Organization (WTO). The forecast also predicts that this economic downturn will continue into 2023, due to the numerous economic shocks the world is currently managing, including ripple effects from the Covid-19 pandemic and the was in Ukraine.

Global trade volume for merchandise is expected to grow by 3.5% in 2022, however, trade volume will slow to 1% in 2023, representing a significant drop from the previously estimated 3.4%

There is concern that the slump in trade growth will further exacerbate the economic crises being felt around the world, with sharply rising food and fuel prices disproportionately affecting the poor. Already, many people around the world are facing worsening living standards as a result of the economic crisis and some regions in particular, such as Latin America and the Caribbean, have been identified as more vulnerable than others.

Global inflation is at its peak following the pandemic and war in Ukraine

The Covid-19 pandemic changed daily life. People couldn’t go to work, entire industries were forced to close, and both national and international travel was suspended. In effect, global economies were forced to stall, this caused a worldwide surge in consumer prices following the worst of the pandemic, felt in 2020. This hike in prices was then further exacerbated by the war in Ukraine, which came at a time when many economies were struggling to bounce back from the effects of the pandemic.

Many important economies, such as Europe and Central Asia, the Middle East, and Africa are hugely dependent on Russia for their wheat supply. Disruption to wheat supply, therefore, has jeopardized food security, which will be felt most in lower-income countries.

The global supply chain disruption that began in the Covid-19 pandemic has been reenforced by the war in Ukraine. Restrictions that have been placed on Russia, in addition to bans on purchasing Russian fuel imposed by many countries including Australia, Great Britain, Canada and the United States, have wreaked havoc with global logistics. Supply chain disruptions that have been linked to the conflict include increased freight charges and container shortages.

Overall, the war in Ukraine caught governments, economists, and bankers off guard. The economic instability caused by the conflict, and inflation it has triggered in the agricultural and energy sectors as well as supply chains, has pushed global inflation further.

WTO warns against trade restrictions

In its World Economic Outlook published in October, the International Money Fund warns that “the worst is yet to come, and for many people 2023 will feel like a recession”. There is also a possibility that individual nations may respond to the slump in world trade by imposing restrictions that keep products within the country. However, this form of protectionism has been warned against by the WTO, which explains that this behavior would only exacerbate inflation, reduce economic growth, and lower living standards further.

The solution would more likely be to establish a less concentrated and more diversified base for producing goods. This would increase supply chain resilience and encourage long-term stability of product prices. This strategy could secure supply chains against future challenges, such as localized disruptions or extreme weather events.

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