Global trade growth expected to be subpar at 1.7% in 2023: WTO

The World Trade Organisation (WTO) on Wednesday said that the global merchandise trade volume is expected to grow 1.7 per cent in 2023 as compared to an earlier estimate of 1 per cent in October, but lower than 2.7 per cent growth in 2022.

The global trade body cautioned that the expected to be ‘subpar’, due to multiple factors, including the ongoing Russia-Ukraine conflict, stubbornly high inflation, tighter monetary policy and financial uncertainty. With this, the trade growth is below the 12-year average of 2.6 per cent since the trade collapse that followed the global financial crisis in 2008. 

An upward revision in the 2023 growth forecast is mainly due to relaxation of Covid-19 pandemic controls in China, which is expected to ‘unleash pent-up consumer demand’ in the country. This, in turn, according to the WTO is expected to boost international trade.

“Interest rate hikes in advanced economies have also revealed weaknesses in banking systems that could lead to wider financial instability if left unchecked. Governments and regulators need to be alert to these and other financial risks in the coming months,” WTO Chief Economist Ralph Ossa said.

On the brighter side, trade growth is expected to rebound to 3.2 per cent in 2024. The estimate, however, is uncertain as a lot will be dependent on how the conflict between Russia and Ukraine pans out.

Some of the risks include rising geopolitical tensions, global food insecurity, the possibility of unforeseen fallouts from monetary tightening, risks to financial stability and increasing levels of debt. “Most serious of all would be a food crisis triggering widespread hunger and starvation in low-income countries. Wealthy countries need to be on the lookout for signs of such a crisis and take steps in advance to prepare for it,” it said.

A  2.7 per cent increase in world trade volume in 2022 was lower than the WTO’s October forecast of 3.5 per cent was mainly due to sharper-than-expected quarter-on-quarter decline in the fourth quarter owing to elevated global commodity prices, monetary policy tightening in response to inflation, and outbreaks of Covid 19 that disrupted production and trade in China.

As far as India is concerned, it’s share is 1.8 per cent in global merchandise trade, ranking at 18th position. In the financial year 2022-23, India is expected to witness nearly 6 per cent YoY growth in merchandise trade at $447 billion. In case of imports, the share is 2.8 per cent, with a ninth rank.

In the case of the world’s leading exporters and importers of commercial services–transport, travel, commercial services, computer services, among others–India’s share was 4.4 per cent in case of exports and 4 per cent in imports. India bagged the seventh position in the case of exports and eight in imports.

While WTO’s trade forecast does not cover services, it said that three years after the onset of the pandemic, international tourism is on a path to full recovery as mobility restrictions have been removed worldwide. “China’s borders in early January 2023 are expected to boost regional and global travel. Over recent years, China ranked as the largest tourism outbound market and spender,” it said.