Global trade is set to lose momentum in the last quarter of 2022 before remaining subdued throughout 2023, according to a new World Trade Organization (WTO) forecast.
The body said that multiple shocks, including the war in Ukraine, high levels of inflation, increasing energy prices and monetary tightening will all contribute to a significant softening of demand for imports in major economies.
Economists at the WTO now predict that overall growth in trade volumes for the second half of 2022 will reach 3.5 percent - a slight improvement on the figure of three percent expected back in April. However, for 2023, projected growth is set to fall from a previous estimate of 3.4 percent to just one percent.
WTO director-general Ngozi Okonjo-Iweala said policymakers around the world are facing "unenviable choices'' as they try to find a balance between concerns such as bringing inflation under control, maintaining high employment and transitioning to green energy.
However, she also emphasized the important role trade plays in enhancing the global supply of goods and services. The director-general therefore urged governments not to impose new trade restrictions as a response to supply chain vulnerabilities that have been exposed by recent global turbulence.
"A retrenchment of global supply chains would only deepen inflationary pressures, leading to slower economic growth and reduced living standards over time," Ms Okonjo-Iweala stated.
The WTO's forecast found significant regional variation in the pressures faced by the global economy, which will have a direct impact on trade demand. For example, in Europe, the major concerns are high energy prices caused by the war in Ukraine, which are expected to result in a squeeze on household spending and higher manufacturing costs.
Meanwhile, in the US, worries over inflation are leading to monetary policy tightening, which will hit spending in areas such as housing and motor vehicles that are especially sensitive to interest rate fluctuations. China, on the other hand, is still facing production disruptions as it continues to enact lockdowns as part of its zero-Covid policy, while it is also facing falling demand for exports.
