WTO warns ‘darkened’ trade outlook could worsen as economic crises converge

The World Trade Organization forecast a sharp slowdown in global trade volumes as “several shocks” including the Russian war in Ukraine, steeper borrowing costs and higher energy prices make manufacturing even more expensive.

The Geneva-based institution said on Wednesday that it expects trade growth to slow to just 1% in 2023 – a sharp drop from its earlier forecast of 3.4% and its forecast of 3.5% for the year growth this year.

“The global economy is facing a multifaceted crisis,” WTO Director-General Ngozi Okonjo-Iweala told reporters. “The picture for 2023 has clouded over significantly.”

The WTO blamed a number of factors for the expected deterioration in trade, including higher energy prices as a result of the Russian war in Ukraine. A number of countries – including members of the European Union and the US – have responded to the conflict by imposing sanctions on Moscow, including on Russian oil exports.

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Trucks in the Port of Los Angeles

Shipping containers and trucks are seen at the Port of Los Angeles in San Pedro, California on November 17, 2021. ((Photo by Apu GOMES/AFP) (Photo by APU GOMES/AFP via Getty Images)/Getty Images)

It also warned of the potential impact of higher interest rates. The Federal Reserve and other major central banks have responded to the worst inflationary crisis in four decades with new austerity measures that threaten to trigger a global recession. Higher interest rates are likely to put a brake on consumer spending, especially on larger spending like homes and vehicles.

Finally, the world continues to grapple with the fallout from the COVID-19 pandemic as China grapples with ongoing lockdowns, border restrictions, extensive quarantines and other measures to contain the spread of the virus.

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“Monetary tightening is weighing on growth across much of the world, including the United States,” the WTO said. “In Europe, high energy prices are putting pressure on households and businesses. And in China, COVID-19 outbreaks continue to disrupt manufacturing and normal economic activity.”

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As usual, the WTO warned that poorer nations could feel the brunt of the ongoing global crises.

federal reserve

The Marriner S. Eccles Federal Reserve Board Building is seen on September 19, 2022 in Washington, DC ((Photo by Kevin Dietsch/Getty Images)/Getty Images)

“Especially low-income developing countries face serious risks from food insecurity and debt crisis,” said Okonjo-Iweala.

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The WTO forecast comes in line with the latest outlook from the Organization for Economic Co-operation and Development, which last week warned the global economy was slowing more than previously thought.

The Paris-based organization still sees it that way global economy Growth of 3.0% this year but forecasts a significant slowdown next year with growth slowing to just 2.2%. That’s a notable change from the 2.8% rate forecast in June and marks a $2.8 trillion fall in global production.

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“The global economy has lost momentum after Russia’s unprovoked, unjustified and illegal war of aggression against Ukraine,” said OECD Secretary-General Mathias Cormann in a statement. “GDP [gross domestic product] Growth has stalled in many economies and economic indicators are pointing to an ongoing slowdown.”

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