The World Trade Organization (WTO) has revised downwards its projections for global trade growth in 2023 after new figures revealed a continuing slump in the global economy.

According to the organization's latest forecast, world merchandise trade is now expected to grow by 0.8 percent by volume this year, down from the 1.7 percent increase predicted in its last Global Trade Outlook and Statistics update in April.

Director-general of the organization Ngozi Okonjo-Iweala said the new figures are a "cause for concern" and could lead to a drop in living standards for people around the world. She noted that the world's economy  is dependent on a stable, open, rules-based trading system.

She added: "Global economic fragmentation would only make these challenges worse, which is why WTO members must seize the opportunity to strengthen the global trading framework by avoiding protectionism and fostering a more resilient and inclusive global economy."

The report found that overall trade output slowed abruptly in the fourth quarter of 2022, with declines felt across a large number of countries and a wide array of goods. 

In the US, the effects of inflation and tighter monetary policy were among the key drivers of the slowdown, while its main competitor China struggled with a challenging property market, which held back an expected post-Covid recovery.

While "slow but stable" GDP growth should pick up in 2024 and support an increase in trade, the report noted early signs of trade fragmentation that could threaten the outlook for next year.

For example, the WTO highlighted that the share of intermediate goods in world trade, which is an indicator of global supply chain activity, fell to 48.5 percent in the first half of 2023, down from an average of 51 percent over the previous three years.

However, the WTO's longer-term forecast for 2024 remains largely unchanged at 3.3 percent, indicating that while the current downturn is set to last longer than initially expected, improvements are on the horizon.

Chief economist at the WTO Ralph Ossa commented: "The data suggest that goods continue to be produced through complex supply chains, but that the extent of these chains may have plateaued, at least in the short run. Positive export and import volume growth should resume in 2024, but we must remain vigilant.”