WTO Cuts 2023 Global Trade Forecast Amid Looming Recession

•Energy crisis to slow down global trade growth

Ndubuisi Francis in Abuja

The World Trade Organisation (WTO) yesterday projected a slowdown in global trade growth in 2023 as sharply higher energy, food prices and rising interest costs curb import demand.

It warned of a possible contraction if the war in Ukraine worsens.

The global trade body predicted that merchandise trade would jump by 3.5 per cent this year, up from its April estimate of 3.0 per cent, but sees trade growth of just 1.0 per cent in 2023, compared with a previous forecast of 3.4 per cent.

The WTO also stated that there was high uncertainty over its forecasts, giving a band of trade growth expansion of 2.0 per cent to 4.9 per cent for this year and of -2.8 per cent to 4.6 per cent for 2023.

Addressing journalists in Geneva, Switzerland, the WTO Director-General, Dr. Ngozi Okonjo-Iweala said, “The picture for 2023 has darkened considerably. If the war in Ukraine worsens, rather than gets better, that’s going to have a huge impact.

“Today, the global economy faces multi-prong crises. Monetary tightening is weighing on growth across much of the world,”

Presenting a revision of their annual trade forecast, WTO economists said they still anticipated global economic growth to rise by 2.8 per cent this year, in line with their expectations in April.

They stated that for 2023, GDP growth was now expected to be just 2.3 per cent, down from the previous forecast of 3.2 per cent.

However, the Organisation for Economic Co-operation and Development (OEDC), which has maintained its 2022 forecast at three per cent, expects 2.2 per cent growth next year.

The International Monetary Fund (IMF) forecasts growth at 3.2 per cent this year and 2.9 per cent in 2023.

Import demand was set to soften as major economies slow, although the slowdown is due to different reasons, according to the WTO.

Europe’s economies are reeling from soaring energy prices, which are squeezing household spending and raising manufacturing costs.

The energy crisis is already pushing Germany — Europe’s biggest economy —into a recession, which would deepen as we head into the winter months amid the ongoing natural gas and energy crisis, Bundesbank, the central bank of Germany, said in its monthly report in September.

Germany also moved last month to nationalise its biggest gas importer, Uniper, to prevent a collapse of German energy and gas suppliers. Across Europe, industries have been forced to curb or shut down production due to soaring energy prices.

In the United States, aggressive Fed rate hikes are set to hit interest-sensitive spending in areas such as housing, motor vehicles, and fixed investment. In China, the zero-Covid policy and weak external demand are challenges to the economy, the WTO said.

“Major central banks are already raising interest rates in a bid to tame inflation but overshooting on tightening could trigger recessions in some countries, which would weigh on imports. Alternatively, central banks might not do enough to bring inflation down, possibly necessitating stronger interventions in the future,” the WTO stated.

Fears of recessions and a strong US dollar weighed on oil prices in the third quarter, when the Brent and WTI benchmarks hit their lowest level since before the Russian invasion of Ukraine.