Global trade projected to increase by 1.7% in 2023, says WTO
The World Trade Organisation (WTO) has released a new forecast on global trade growth in 2023, which paints a subpar picture despite a slight upgrade to GDP projections since last fall.
According to WTO economists, the volume of world merchandise trade is expected to grow by 1.7% this year, following 2.7% growth in 2022. Unfortunately, this smaller-than-expected increase was pulled down by a sharp slump in the fourth quarter of last year, which was caused by various factors, including elevated global commodity prices, monetary policy tightening, and COVID-19 outbreaks that disrupted production and trade in China.
The WTO’s “Global Trade Outlook and Statistics” report estimates real global GDP growth at market exchange rates of 2.4% for 2023. However, projections for both trade and output growth are below the averages for the past 12 years, with 2.6% and 2.7% respectively.
Despite these challenges, WTO Director-General Ngozi Okonjo-Iweala emphasised the resilience of trade as a force for the global economy. She warned that it will remain under pressure from external factors in 2023, making it more critical for governments to avoid trade fragmentation and refrain from introducing obstacles to trade. Instead, investing in multilateral cooperation on trade would bolster economic growth and people’s living standards over the long term.
Furthermore, the WTO’s Chief Economist Ralph Ossa noted that the lingering effects of COVID-19 and the rising geopolitical tensions were the main factors impacting trade and output in 2022, and it is likely to be the case in 2023 as well. Interest rate hikes in advanced economies have also revealed weaknesses in banking systems that could lead to wider financial instability if left unchecked. Therefore, governments and regulators need to be alert to these and other financial risks in the coming months.
The 2.7% increase in world trade volume in 2022 was weaker than the WTO’s October forecast of 3.5%, and the 1.7% forecast for trade growth in 2023 is up from the previous estimate of 1.0% from last October. The relaxation of COVID-19 pandemic controls in China is expected to unleash pent-up consumer demand in the country, which should boost international trade.
However, looking ahead to 2024, trade growth should rebound to 3.2%, as GDP picks up to 2.6%. Still, this estimate is more uncertain than usual due to the presence of substantial downside risks, including geopolitical tensions, food supply shocks, and the possibility of unforeseen fallout from monetary tightening.
The WTO’s new forecast on global trade growth in 2023 reveals a subpar outlook despite a slight upgrade to GDP projections since last fall. The lingering effects of COVID-19, rising geopolitical tensions, and interest rate hikes in advanced economies are among the external factors that will continue to impact trade and output this year. However, investing in multilateral cooperation on trade and remaining vigilant about financial risks could help mitigate some of these challenges in the coming months.
