On April 5th local time, the latest Global Trade Data and Prospects report released by the World Trade Organization predicted that global trade in goods will increase by 1.7% in 2023, higher than the 1% predicted in October last year. The report also points out that due to multiple risks such as geopolitical tensions, high inflation, monetary policy tightening, and rising debt levels, the prospects for trade growth still face high uncertainty. WTO calls on all governments to avoid fragmentation of trade, maintain free trade flow, strengthen multilateral trade cooperation and jointly promote global economic recovery.
Global trade will grow by 1.7% this year
The World Trade Organization stated that although its forecast for global economic growth has slightly increased since last autumn, global trade growth in 2023 will still be below average due to the ongoing crisis in Ukraine, high inflation, tight monetary policy, and uncertainty in financial markets. Global commodity trade is expected to grow by 1.7% this year.
According to the World Trade Organization, this data is better than the predicted growth rate of 1.0% six months ago, but it is one percentage point lower than the trade growth rate in 2022 and also lower than the average growth rate of 2.6% in the past 12 years.
Due to the significant decline in trade growth in the fourth quarter, global commodity trade volume increased by 2.7% in 2022, lower than the previously predicted growth of 3.5%. Meanwhile, in 2022, global trade in goods increased by 12% to $25.3 trillion, and global trade in commercial services increased by 15% to $6.8 trillion.
The report points out that global inflation continued to rise last year, with significant fluctuations in commodity prices and the US dollar exchange rate. Due to strong price fluctuations often distorting trade volume statistics, more attention should be paid to trade volume when predicting trade conditions.
According to World Trade Organization economists, calculated at market exchange rates, the global GDP growth rate this year will be 2.4%, higher than the 2.3% predicted in October last year, but lower than the average growth rate of 2.7% in the past 12 years. In addition, with the acceleration of economic expansion, the global commodity trade volume and GDP growth rate will rebound to 3.2% and 2.6% respectively in 2024.
From a regional perspective, the GDP growth rate in the European region is expected to increase by 0.7 percentage points in 2023, while the Asian region is expected to decrease by 0.4 percentage points. In terms of exports, it is expected that North America, the Commonwealth of Independent States, Asia, and Europe will have the fastest commodity growth in 2023, with 3.3%, 2.8%, 2.5%, and 1.8% respectively; In terms of imports, the import volume of North America, South America, and Europe is expected to contract with weak domestic demand.
The World Trade Organization stated that optimizing and adjusting epidemic prevention measures in China is a "key factor" in raising the expected global trade growth rate in 2023. Relevant policy adjustments will help release consumer demand and promote international trade growth.
Multiple risks affecting trade growth prospects
In its report, the World Trade Organization pointed out that due to multiple downward risks, including geopolitical tensions, food supply shocks, financial instability, and rising debt levels, future trade growth still faces high uncertainty.
Ralph Ossa, the chief economist of WTO, believes that the continued impact of the COVID-19 and the intensification of geopolitical tensions are the main factors affecting global trade and output in 2022, and this situation is likely to continue in 2023. The decline in supply caused by geopolitical conflicts has exacerbated inflation and reduced trade growth.
World Trade Organization economists say inflation is the main culprit leading to slow trade growth. The report states that several factors led to a decline in trade growth in the fourth quarter of 2022, with the most prominent being the rise in global commodity prices. Although current food and energy prices have dropped from their high levels in early 2022, they are still higher than pre 2022 levels, eroding people's income and demand for imported goods.
To curb inflation, countries have started interest rate hikes, leading to a tightening of the financial environment and turmoil in the banking industry in Europe and America, reducing commodity demand and further weakening trade growth. The report states that aggressive interest rate hikes in developed economies have exposed weaknesses in the banking system, and if left unchecked, it may lead to broader financial instability. The government and regulatory agencies need to remain vigilant about financial risks in the coming months.
The World Trade Organization has warned that central banks must strike a balance between curbing inflation, promoting economic growth, and maintaining financial stability. Misjudgment of the situation may have negative impacts on the global economy and trade.
The Wall Street Journal of the United States reported that overseas sales in the Asian region have been declining for several months due to inflation and rising interest rates harming Western public spending, affecting Asian exporters. During the most severe period of the epidemic, Asian economies benefited from strong demand from Western consumers for fitness equipment, home comfort products, and electronic products due to long-term work from home. However, Western consumers have gradually shifted their spending back towards dining out, tourism, and other services, weakening demand for Asian manufactured goods.
In addition, data from the United States Department of Commerce on April 5 showed that the US trade deficit continued to expand in February, increasing by 2.7% to US $70.5 billion, the largest deficit in four months, as exports declined more than imports. Andrew Hunter, a senior American economist at Kaitou Macro, said that this is a sign of slowing economic growth, and the data for the second quarter may fall further.
Call for continued strengthening of multilateral trade cooperation
The World Trade Organization believes that the international market is still "widely open". WTO Director General Ivira stated that trade remains a force promoting global economic recovery, and therefore maintaining free trade flow is important.
But trade will continue to face external pressure in 2023. Ivera believes that this also highlights the importance of governments to avoid fragmentation of trade and exercise restraint in introducing trade restrictions. Strengthening multilateral trade cooperation will promote economic growth and people's living standards in the long run
Trade growth in many industry sectors is revitalizing. With the lifting of travel restrictions worldwide, the international tourism industry is on a path of comprehensive recovery. Before the epidemic, the tourism industry accounted for about a quarter of global service trade. In addition, digital service exports increased by 13% to $3.82 trillion in 2022. Ivira stated that 86 countries are developing a new agreement to agree on digital trade rules, which may be completed within a year.
According to a study by the World Trade Organization on the impact of the Ukrainian crisis on global trade in the past year, fragile economies can find alternative products and suppliers to obtain basic food supplies. This is unlikely to happen without an open and inclusive multilateral trading system to support the global economy.
The World Trade Organization points out that if international cooperation is disrupted, the least developed countries will bear the most severe impact. Therefore, in the long run, strengthening the multilateral trading system is of great significance.
Osa stated that despite the impact on global trade over the past year, it still performed well and did not experience the "worst case scenario" foreseen earlier. Due to the openness of the multilateral trading system and cooperation among governments, significant increases in food prices and supply shortages have not become a reality.
Osa believes that cultivating deeper and more diversified international markets based on open and predictable trade rules will make global trade more resilient.