Global Economy will Face Trade Slowdown: WTO

The World Trade Organization (WTO) indicated that world trade will remain subdued in 2023 due to multiple shocks to the global economy that will follow a foreseen loss of momentum during 2H22. 

WTO economists expect that global merchandise trade volumes will slightly increase by 3.5 percent in 2022, surpassing forecasts from April 2022 that indicated a growth of 3.0 percent. The economists, however, foresee a minimal 1.0 percent increase for 2023, which sharply lowers the previous 3.4 percent estimate. 

“Import demand is expected to soften as growth slows in major economies for different reasons. In the EU, high energy prices stemming from the Russia-Ukraine war will squeeze household spending and raise manufacturing costs. In the US, monetary policy tightening will hit interest-sensitive spending in areas such as housing, motor vehicles and fixed investment. China continues to grapple with COVID-19 outbreaks and production disruptions paired with weak external demand. Finally, growing import bills for fuels, food and fertilizers could lead to food insecurity and debt distress in developing countries,” reads WTO’s press release.

Ngozi Okonjo-Iwala, Director-General, WTO, explained that a retrenchment of supply chains will only deepen inflationary pressures, prompting slow economic growth and severe effects on long-term living standards. Okonjo-Iweala stressed the need for a more diversified and less concentrated base for the production of goods and services, which would provide resilience for supply chains and stability in the long-term for global prices. The WTO's 12th Ministerial Conference (MC12) took place in June 2022, as Okonjo-Iweala highlighted that cooperation is vital to address the world’s most complex issues. 

"Policymakers are confronted with unenviable choices as they try to find an optimal balance among tackling inflation, maintaining full employment, and advancing important policy goals such as transitioning to clean energy. Trade is a vital tool for enhancing the global supply of goods and services, as well as for lowering the cost of getting to net-zero carbon emissions," said Okonjo-Iweala. 

The WTO estimated that the world’s GDP will grow by 2.8 percent in 2022 at market exchange rates. However, it lowered 2023’s estimates by 1.0 percentage, projecting a 2.3 percent growth for the upcoming year. 

The Mexican economy is also showing signs of slowing down, as the country’s economic activities continue to register minimal increases and worse results than those of 2021, as previously reported by MBN.