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WTO drastically reduces world trade growth forecasts for 2023

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The World Trade Organization (WTO) sharply lowered on Wednesday its forecast for world trade growth for 2023, in an economy globally affected by multiple shocks such as the war in Ukraine and currency restrictions.

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The outlook for 2023 has darkened considerably. The world economy is confronted with multiple crises. Rising interest rates weigh on growth in much of the world”, declared the director general of the WTO, Ngozi Okonjo-Iweala, when presenting the forecasts.

WTO economists currently expect global merchandise trade volume growth of 3.5% in 2022 – slightly higher than the 3% increase forecast in April, but project a 1% increase for 2023 – a sharp decline from the previous estimate of 3.4% published in April.

As for world GDP, according to the new WTO forecasts, world GDP is expected to grow by 2.8% in 2022 and 2.3% in 2023 (1.0 percentage point less than the previous forecast for the latter figure).

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By comparison, the OECD, which has kept its forecast at 3% for 2022, recently announced that it expects 2.2% growth next year.

The IMF, for its part, expects growth of 3.2% this year and 2.9% in 2023.

Uncertainty

If the institution’s current forecasts are confirmed, trade growth will slow dramatically in 2023, but remain positive.

However, the WTO notes that there is a “great uncertainty about the forecasts due to the change in monetary policy in advanced economies and the unpredictable nature of the war initiated by Russia in Ukraine”, recalled the economist of this organization, Coleman Nee.

Added to this are the “challenges facing monetary and budgetary policies”, he assured.

By 2023, if downgrade risks materialize, trade growth could be negative (-2.8%), but if good news returns it could reach 4.6%, according to the WTO.

Last week, Okonjo-Iweala claimed that the world was heading towards a “global recession”.

Policy makers are confronted with difficult dilemmas in the search for an optimal balance between fighting inflation, maintaining employment, and achieving important goals such as the clean energy transition.”, he mentioned on Wednesday.

A reduction in supply chains would only aggravate inflationary pressures, leading to slower economic growth and lower living standards in the long run.” he warned.

less imports

The demand for imports will be reduced throughout the world due to the effect of the slowdown in growth, in turn caused by various factors in the large economies.

In Europe, the rise in energy prices as a result of the war in Ukraine will cause a compression of household spending and an increase in costs in the manufacturing sector, details the WTO.

In the United States, the tightening of monetary policy will have an impact on interest rate-sensitive spending, such as the housing, auto, and fixed-equity investment sectors.

China continues to face new outbreaks of COVID-19 and production disruptions associated with weak foreign demand, the WTO continued.

In short, the increase in the bill for fuel, food and fertilizer imports could generate food insecurity and an increase in debt in developing countries.

The WTO also highlighted that an excessive tightening of monetary policy could cause recessions in some countries.

(With information from AFP)

Source: Gestion

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