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WTO sees slower trade growth in 2022 amid Ukraine war, poor countries hit most

The WTO released its annual projections for trade over the coming year. These reveal the extent to which the conflict in Ukraine has affected the outlook for global commerce.

The institution’s director-general Ngozi Okonjo-Iweala said that because of the conflict, the latest set of economic projections were “less certain than usual”.

Nevertheless, the WTO’s economists anticipate that merchandise trade will grow by 3.0% in 2022 as compared with the previous year. This is sharply reduced from the pre-war estimate of a rise of 4.7%, and well below the year-on-year increase of 9.8% recorded in 2021, when the world was recovering from the COVID-19 pandemic.

The forecast for 2023 is for a further increase of 3.4%.

World trade shows ‘resilience’ in face of mounting costs

”Global trade is often driven by global GDP growth, and we know that that has been substantially reduced,” said WTO chief economist Robert Koopman.

The WTO’s current estimate is for world GDP to grow by 2.8% in 2022, down 1.3 percentage points from the previous forecast of 4.1%.

Koopman nevertheless stressed the “resilience” of global trade, which he said would continue to grow even in the face of the Ukraine war, the pandemic, and ongoing trade restrictions by some countries.

The chief economist added: “Increases in trade costs caused by supply chain issues will impact on the economy’s ability to respond”.

On Monday, the WTO published a report which focused more specifically on the war in Ukraine, and its possible systemic effects for global trade.

Poor countries set to feel trade impact of Ukraine war

“The costs [of the conflict] in terms of reduced trade and output are likely to be felt by people around the world through higher food and energy prices and reduced availability of goods exported by Russia and Ukraine,” warned the report, entitled The Crisis in Ukraine: Implications of the war for global trade and development.

Poorer countries were at particularly high risk from the war, the WTO said, since these countries tend to spend a larger fraction of their incomes on food.

“This could impact political stability,” the report warned.

The sanctions imposed by many countries against Russia could lead to more specific impacts in certain sectors, the report continued.

The fact that Russia is one of the world’s main suppliers palladium and rhodium – key inputs in the production of catalytic converters and semiconductors – could “harm the recovery of automobile manufacturing”, the report said.

At a more general political level, the report said there was a risk of trade becoming “more fragmented” in the event of a reversion to trade based on geopolitical blocs.

“Even if no formal blocs emerge, private actors might choose to minimise risk by reorienting supply chains. This could reduce global GDP in the long run by about 5 per cent, notably by restricting competition and stifling innovation,” the report warned.

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