GENEVA (AN) — Global trade growth in 2023 is expected to slow to a "subpar" 1.7% despite a slight upgrade to GDP projections since last fall, WTO economists said.
The updated forecast released Wednesday would represent a significant decline from the 2.7% growth rate in 2022, but is up from WTO's October estimate of 1%.
“Trade continues to be a force for resilience in the global economy, but it will remain under pressure from external factors in 2023," said WTO Director-General Ngozi Okonjo-Iweala.
"This makes it even more important for governments to avoid trade fragmentation and refrain from introducing obstacles to trade," she said.
WTO pointed to Russia's war in Ukraine and the broader geopolitical tensions it has spread as the main factor for the lagging growth in merchandise trade volumes, along with food insecurity, inflation and monetary policy tightening.
But global trade growth is expected to rebound to 3.2% next year as GDP growth rises slightly back to the pre-COVID-19 pandemic levels of 2019.
Health and geopolitical factors to blame
The Geneva-based trade body said a key factor for raising the forecast to 1.7%, up from the 1%, is due to the relaxation of pandemic controls in China, reviving the nation's consumer demand.
“The lingering effects of COVID-19 and the rising geopolitical tensions were the main factors impacting trade and output in 2022 and this is likely to be the case in 2023 as well," said WTO Chief Economist Ralph Ossa.
Another factor causing unease is the collapse of banks and banking consolidation.
Rich nations' interest rate hikes "revealed weaknesses in banking systems that could lead to wider financial instability if left unchecked," Ossa warned. "Governments and regulators need to be alert to these and other financial risks in the coming months.”
WTO cautioned its 3.2% forecast for next year is "more uncertain than usual" due to risks from geopolitical tensions, food supply shocks and monetary tightening.
