Trade growth to slow to 1.7% in 2023 after 2.7% growth in 2022

World trade growth is expected to remain subpar in 2023, despite a slight upward revision to GDP forecasts since last autumn, WTO economists said in a new forecast on April 5. Affected by factors such as the Russia-Ukraine conflict, persistently high inflation, monetary policy tightening and financial market uncertainty, world merchandise trade volume is expected to grow by 1.7% this year and by 2.7% in 2022, an increase of less than The expected increase was the result of a sharp decline in the fourth quarter.

The WTO's trade projections in its new Global Trade Prospects and Statistics report project global real GDP growth at market exchange rates of 2.4% in 2023. Forecasts for trade and output growth were below the 12-year average of 2.6 percent and 2.7 percent, respectively.

WTO Director-General Ngozi Okonjo-Iweala said: "Trade remains a resilient force in the global economy, but it will remain under pressure from external factors through 2023. This allows governments to avoid trade fragmentation and avoiding barriers to trade has become even more important. Investing in multilateral trade cooperation, as WTO members did at the Twelfth Ministerial Conference last June, will boost long-term economic growth and people's living standards develop."

World trade volumes will grow by 2.7% in 2022, below the WTO's previous forecast of 3.5%, as a larger-than-expected quarter-on-quarter decline in the fourth quarter weighs on full-year growth. Several factors have contributed to the downturn, including rising global commodity prices, tightening monetary policy to combat inflation, and the pandemic disrupting production and trade in some countries.

Notably, last year's trade growth was in line with the 2.4% to 3.0% baseline scenario in the WTO's preliminary March 2022 report on the Russia-Ukraine conflict, well above its more pessimistic scenario, in which countries begin to split into Competing economic blocs, trade grew by just 0.5%. As a result, international markets remain broadly open. A follow-up study published by the WTO last month documented how vulnerable economies were able to make up for disruptions in basic food supplies disrupted by the war by finding alternative products and suppliers.

Meanwhile, the forecast for trade growth in 2023 was 1.7%, up from 1.0% in October last year. A key factor here is that China has aggressively adjusted its epidemic prevention and control measures, which are expected to unleash pent-up consumer demand in China and in turn boost international trade.

"The pandemic that started in 2019 and rising geopolitical tensions are the main factors affecting trade and output in 2022, and probably 2023 as well," said WTO chief economist Ralph Ossa. Rate hikes in developed countries have also exposed weaknesses in the banking system that, if left unchecked, could lead to wider financial instability. Governments and regulators need to remain vigilant about these and other financial risks in the coming months."

Looking ahead to 2024, trade growth should rebound to 3.2% as GDP recovers to 2.6%, but this is due to significant downside risks, including geopolitical tensions, food supply shocks, and possible unforeseen consequences of monetary tightening. One estimate is more uncertain than usual.