Ukraine war to halve global trade growth – WTO
The Ukraine war has led the World Trade Organization (WTO) to cut its global trade growth forecast for this year.
The previous 4.7% growth forecast has been cut to 2.5% due to “the impact of the war and related policies”, said WTO boss Dr Ngozi Okonjo-Iweala.
The cut is also linked to continuing global supply chain problems that started as a result of the pandemic.
She said disruptions would make food more costly, saying “my worry is that we have a food crisis that is brewing”.
Dr Okonjo-Iweala told the BBC that although Russia and Ukraine only make up about 2.5% of global merchandise exports, they “are very, very significant in certain sectors”.
“The first worry, of course, is for the people of Ukraine, who are being displaced [and] not having enough food to eat,” she said.
She added the global economy was “going to suffer some severe consequences”, and said poorer countries would particularly feel the impact of the shortages, and “the supply constraints on food”.
Supplies of many food products including wheat and corn have been affected following Russia’s invasion of Ukraine.
Industry groups have warned the EU faces a shortage of sunflower oil. In total, 46.9% of global exports come from Ukraine and 29.9% from Russia according to S&P Global, but with Ukraine’s ports closed it is struggling to export it.
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“I’m truly worried about looming hunger, particularly in poor countries that can least afford it,” Dr Okonjo-Iweala warned.
Using Africa as an example, the former Nigerian finance minister said 35 of 55 countries there imported wheat and other grains from Russia and Ukraine and 22 imported fertiliser.
“Work being done by the African Development Bank now shows that in many countries, food prices are rising by 20% to 50% already,” she said.
However, Dr Okonjo-Iweala said she was hopeful there were solutions to the supply problems.
She said in the short term countries could be “changing our dietary tastes” to eat more homegrown products.
She added in the longer term Africa was investing in “heat tolerant varieties of wheat and other crops” as it adapts to climate change.
As well as food prices surging, the cost of other commodities have hit record highs amid concerns the war and economic sanctions on Russia will lead to supply disruptions.
Russia’s mining industry is hugely important for many substances such as palladium, where it is responsible for 40% of global production of the metal that is essential for carmakers.
Even before the war in Ukraine, the pandemic had caused a mismatch between supply and demand in many industries which pushed prices up, and the International Monetary Fund has warned that soaring inflation will reduce global economic growth this year.
“In the short to medium term, I think that we are going to see these inflationary pressures continue,” Dr Okonjo-Iweala said.
Trade battle with Russia
Trade has become a key tool many countries have used to pressure President Vladimir Putin over his decision to invade Ukraine.
Ukraine has cut economic ties with Russia and led calls for it to be suspended from the WTO because of the war. However no country has ever been expelled from the WTO, something the Director-General said is “not an easy thing to do”.
She says there is no mechanism to kick Russia out despite some leading international trade lawyers disagreeing.
