WTO downgrades trade growth outlook to 0.8% amid slowing global trade

By Onome Amuge.

The World Trade Organisation (WTO) has revised its 2023 outlook for global trade, lowering expectations due to a lack of expected rebound in trade volumes from the previous year’s slump. The WTO now projects world merchandise trade volumes to grow by just 0.8 per cent in 2023, less than half the 1.7 per cent annual increase projected in April.

According to the WTO’s figures, a broad-based slowdown in trade volumes has affected a wide range of goods, including iron and steel, office and telecom equipment, textiles, and clothing. However, passenger vehicles have seen a surge in sales this year.

Overall, all global regions except Asia are expected to experience lower trade growth in 2023 than in 2022. Asia’s trade volumes are projected to grow by 0.6 per cent, compared to 0.4 per cent in 2022, marking the second consecutive year that the region’s trade growth has been below the global average.

The current flagging trade environment has impacted Asia-focused banks, with several major lenders citing flat or declining trade finance revenues due to slower goods trade in the region.

Looking ahead, the WTO projects a 3.3 per cent increase in trade volumes in 2024, supported by steady GDP growth, easing inflation, and moderating interest rate hikes. However, the WTO notes that emerging supply chain fragmentation could threaten this positive outlook, a sentiment echoed by Standard Chartered Global Research.

While the WTO has taken steps to restore its relevance, Standard Chartered economists observed that the push towards trade liberalisation is largely taking place outside the WTO structure, through bilateral and regional free trade agreements that reinforce global trade fragmentation into specific corridors and regional pacts. The bank’s economists made this observation.

The WTO’s chief economist, Ralph Ossa, notes that “some signs of trade fragmentation linked to geopolitical tensions’ ‘ can be seen in the data. However, he stresses that broad-based deglobalisation has not yet occurred, and that goods continue to be produced through complex supply chains.

He adds that the extent of these chains may have plateaued in the short term, but that positive export and import volume growth should resume in 2024. Despite this, he emphasizes the need to remain alert to changes in global trade patterns.

To improve the outlook for trade, Ngozi Okonjo-Iweala,WTO director-general encourages WTO members to seize the opportunity to strengthen the global trading framework by avoiding protectionism and promoting a more resilient and inclusive global economy.

Okonjo-Iweala adds that for the world’s poorest countries, recovery will be impossible without a multilateral trading system that is stable, open, predictable, rules-based, and fair.