WTO: Global trade growth to contract in 2023

The World Trade Organisation (WTO) economists have forecasted a 3.5% growth in global merchandise trade volumes for the year 2022, a slight improvement from the 3% forecast made in April. However, the outlook for 2023 is bleak, with only a 1% increase anticipated, a sharp decline from the previous estimate of 3.4%. Coleman Nee, a Senior Economist at the World Trade Organisation, recently shared his insights on these projections with CNBC Africa's Julius Bizimungu. When the spring trade forecast was issued in April, it was shortly after the Russia-Ukraine conflict had begun, leaving the experts with limited hard data on its direct impact. This lack of data necessitated the use of economic simulations to make predictions. The GDP growth estimate of 2.8% at market exchange rates and the 3% trade growth forecast for 2022 turned out to be fairly accurate. The actual trade growth in 2022 recorded at 3.5% aligned closely with the initial prediction. In terms of the factors driving the growth in 2022, sanctions in the CIS region, which includes Russia, led to a contraction in export and import volumes. Additionally, robust growth was observed in exports and imports in North America and Europe during the first half of the year, although a tapering off is expected in the second half. Middle East and African countries also experienced strong export growth due to a continued rebound from the COVID-19 pandemic, particularly in the oil sector. Looking ahead to 2023, the outlook is less optimistic. GDP growth is forecasted to slow to 2.3%, almost a percentage point lower than the previous prediction. Trade growth is expected to decelerate sharply to 1% in 2023, down from the 3.4% initially foreseen. This subdued outlook is driven by various headwinds such as persistently high inflation, escalating energy crises in Europe, and tightening monetary policies in the United States. Amid concerns about the impact of COVID-19 outbreaks and production disruptions in China on global supply chains, Nee emphasized the importance of monitoring indicators like purchasing managers' indices and inventory levels. While there have been signs of inventory recovery and shortened delivery times, these developments could also indicate weakening global demand rather than a return to normalcy. Regarding the outlook for Africa, there is a projected rebound in export and import volumes for 2022, driven partly by strong demand for fuels following reductions in exports from the CIS countries. However, African export growth is expected to slow down and decline by 1% in 2023, bringing it back to the levels of 2018. In conclusion, the downgrade in the trade growth forecast for 2023 from 3.4% to 1% is justified by the anticipated slowdown in world GDP from 2.8% to 2.3%. The historical correlation between global trade and GDP suggests that trade tends to experience larger contractions in times of economic deceleration, amplifying the effects of the overall slowdown. These projections highlight the challenges that lie ahead for the global economy and trade landscape.