The World Trade Organization (WTO) has revised its outlook for global goods trade in 2023, citing multiple global factors that have tempered expectations for a robust recovery. The organization, headquartered in Geneva, Switzerland, highlighted that persistent inflation, higher interest rates, a turbulent Chinese property market, and the ongoing Ukraine conflict have cast a shadow over the world’s trade landscape.
In a statement issued on Thursday, the WTO disclosed that merchandise trade volumes were now expected to grow by a modest 0.8% in 2023, a marked downgrade from its previous April estimate of 1.7%.
Looking forward to 2024, the WTO envisions a slight improvement in goods trade growth, with a forecast of 3.3%, which remains relatively unchanged from the previous estimate of 3.2%.
This slowdown in trade is widespread, affecting various nations and industries. Notably, sectors such as iron and steel, office and telecom equipment, textiles, and clothing have experienced contractions. A noteworthy exception, however, is the automotive industry, which has seen remarkable growth in sales throughout the year.
While acknowledging certain risks, including the potential for a more significant deceleration in China’s economy and persistent inflation leading to sustained high-interest rates, the WTO also recognizes the possibility of a rapid reduction in inflation, which could provide a more optimistic trade outlook.
Regarding concerns about global trade fragmentation, the WTO observed some signs of trade tension but found no conclusive evidence of a broader trend of “de-globalization” that would threaten its 2024 forecast. One key indicator was the decline in the share of intermediate goods in world trade, which fell to 48.5% in the first half of 2023, compared to an average of 51.0% over the previous three years. The reasons behind this decline, whether due to geopolitical tensions or a general economic slowdown, remain uncertain.
WTO Director-General Ngozi Okonjo-Iweala expressed concern about the potential repercussions of a trade slowdown, particularly for the living standards of people worldwide, especially in economically disadvantaged nations. She emphasized that global economic fragmentation could exacerbate these challenges.
It is essential to note that the WTO’s forecast focuses exclusively on goods trade and does not encompass services. However, the organization did point out a moderation in services trade growth following a robust rebound in international tourism in 2022. According to the WTO, global commercial services trade increased by 9% in the first quarter of 2023, marking a significant drop from the 19% growth observed in the second quarter of 2022.
These complex dynamics continue to shape the global trade landscape, with hopes that stability and resilience can be achieved in the face of ongoing challenges.
Photo Credit: EQRoy/Shutterstock
By: Montel Kamau
Serrari Financial Analyst
5th October, 2023
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