The World Trade Organization (WTO) expects world trade growth to slow sharply to one percent in 2023, down from its highest forecast of 3.5 percent this year.
WTO economists say trade plays an important role in keeping the world economy running during the COVID-19 pandemic. While trade in goods plummeted amid the 2020 lockdown, it then rebounded so that the world had a steady supply of food, medicine and other essentials.
But they say crises with multiple causes, including a pandemic, climate shocks and war in Ukraine continue to cause supply chain disruptions. According to them, budget and monetary policies and inflationary pressures have caused energy and commodity prices to rise. It said low-income developing countries were particularly at risk from debt insecurity and stress.
WTO Director General Ngozi Okonjo-Iweala said most regions are likely to record somewhat positive export growth in 2023, with the exception of Africa and the Middle East. The two regions, he said, will experience negative export growth. He added that next year’s world GDP is expected to slow 2.3 percent, down nearly a full percent from the WTO’s previous forecast.
“Policymakers face an uneasy choice as they seek to find the optimal balance between fighting inflation, maintaining jobs, and advancing important policy goals such as the transition to cleaner energy. Trade restrictions may be a tempting response to economic pressures, but they will only deepen inflationary pressures and reduce living standards.”
Okonjo-Iweala said free trade generates growth and helps keep prices from rising. For example, keeping the market open for food trade, he said, would increase the availability of staple foods and keep prices down.
“Our monitoring of the food trade shows some of the recent setbacks to restrictions, so we have to remain vigilant. A better future response to the supply chain vulnerabilities impacted in the last two years is to build a more diversified base that is less focused on the production of goods and services,” he added.
He added that diversity will drive economic growth, support supply security and price stability in the long term. Diversity can also help meet current and future economic challenges. [ps/lt]