The World Trade Organization has warned that growth in export volumes will slow this year as rising interest rates and financial instability weigh on an environment already hit by a revival of protectionism.
Volumes increased by 2.7 per cent over the course of 2022 — a lower than expected figure as the war in Ukraine and sanctions on Russia damaged supply chains still recovering from the early stages of the pandemic. This year growth is expected to be even slower, at just 1.7 per cent — well below the average level for the past decade of 2.6 per cent.
“The lingering effects of Covid-19 and the rising geopolitical tensions were the main factors impacting trade and output in 2022 and this is likely to be the case in 2023 as well,” said Ralph Ossa, chief economist of the WTO.
He added that sharp rises in borrowing costs by global central banks over the course of 2022 had also revealed weaknesses in banking systems that could lead to wider financial instability if left unchecked. “Governments and regulators need to be alert to these and other financial risks in the coming months,” he said.
The latest forecast for 2023 is higher than the 1 per cent growth the WTO predicted in October, when most economists still expected a sharp slowdown in growth this year. The economic outlook has now improved. However, trade is still expected to lag behind broader global growth. “It’s not good, but it’s less bad,” Ngozi Okonjo-Iweala, WTO director-general, told the Financial Times.
Okonjo-Iweala said the upgrades followed the easing supply chain disruptions in recent months. The loosening of lockdowns in China was also expected to unleash pent-up consumer demand, increasing international trade.
While concerns last year that trade in food would be hit by the war in Ukraine proved overblown after countries found alternative sources, the WTO remains worried that the conflict could lead to famine.
“The best thing to help us feel more secure is for the war in Ukraine to end,” the WTO director-general said. “If we have a crop failure in a major producing region in the world, that could really create problems of food security.”
She called on countries to drop all export restrictions on food and fertilisers — about 67 were in place, down from 100 after the outbreak of war in February 2022. Countries have agreed to waive them for purchases by the UN’s World Food Programme.
“One in five calories consumed in the world is traded. Trade has really been a force for resilience in the world and that’s why it’s important to keep a free flow of trade,” Okonjo-Iweala said.
Ethiopia, which relies on disrupted Black Sea exports for almost half its wheat, had found supplies from Argentina and the US. Turks had switched from eating wheat to rice.
While the outlook for trade in goods was pessimistic, services exports performed better. Services trade rose 15 per cent by value in 2022 compared with 2023. Digital services hit $3.8tn, up by 13 per cent.
“Streaming video, education services, all of those things, they are growing at a phenomenal rate. This is incredible,” Okonjo-Iweala said.
She said 86 countries were working on a new deal to agree rules for digital trade, which could be concluded within a year.
Source: Economy - ft.com
