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Info Service on UN Sustainable Development (Oct23/06) Yerevan, 6 Oct (D. Ravi Kanth) — Global merchandise trade is apparently in dire straits due to a manufacturing slump, with growth now being scaled down to 0.8% this year, less than half the 1.7% increase projected earlier in April, according to the latest figures released by the World Trade Organization’s economists on 5 October. Despite the erratic trends in global trade, the WTO economists said that the 3.3% growth projected for 2024 remains unchanged. In a press release issued along with its latest update to the Global Trade Outlook and Statistics on 5 October, the WTO claimed that real-world GDP (gross domestic product) would grow by 2.6% at market exchange rates in 2023 and by 2.5% in 2024, as set out in its latest update. Surprisingly, in a volatile world economy, which is facing “rough weather” on several fronts and where short- and medium-term uncertainty appears to have become the order of the day, the WTO said that: “Trade growth should pick up next year accompanied by slow but stable GDP growth.” “Sectors that are more sensitive to business cycles should stabilize and rebound as inflation moderates and interest rates start to come down.” It noted that “signs are starting to emerge of supply chain fragmentation, which could threaten the relatively positive outlook for 2024.” According to the press release, “the share of intermediate goods in world trade, an indicator of global supply chain activity, fell to 48.5% in the first half of 2023, compared to an average of 51.0% over the previous three years. Furthermore, the share of Asian bilateral partners in US trade in parts and accessories – a key subset of intermediate inputs – fell to 38% in the first half of 2023, down from 43% in the same period of 2022.” “The projected slowdown in trade for 2023 is cause for concern, because of the adverse implications for the living standards of people around the world,” the WTO Director-General, Ms Ngozi Okonjo-Iweala, said in the press release. “Global economic fragmentation would only make these challenges worse, which is why WTO members must seize the opportunity to strengthen the global trading framework by avoiding protectionism and fostering a more resilient and inclusive global economy. The global economy, and in particular poor countries, will struggle to recover without a stable, open, predictable, rules-based and fair multilateral trading system,” she added. “We do see some signs in the data of trade fragmentation linked to geopolitical tensions. Fortunately, broader de-globalization is not here yet. The data suggest that goods continue to be produced through complex supply chains, but that the extent of these chains may have plateaued, at least in the short run. Positive export and import volume growth should resume in 2024, but we must remain vigilant,” said WTO Chief Economist Ralph Ossa. According to the press release, while world commercial services trade is not covered by the forecast, preliminary data show that growth in the sector may be moderating following last year’s strong rebounds in transport and travel. World commercial services trade was up 9% year-on-year in the first quarter of 2023 compared to a 19% year- on-year rise in the second quarter of 2022. In the update to its Global Trade Outlook and Statistics, the WTO said: “World trade and output slowed abruptly in the fourth quarter of 2022 as the effects of tighter monetary policy were felt in the United States, the European Union and elsewhere, but falling energy prices and the end of Chinese pandemic restrictions raised hopes of a quick rebound. So far, these hopes have not materialized, as strained property markets have prevented a stronger recovery from taking root in China, and as inflation has remained sticky in the United States and the EU. Together with the after-effects of the war in Ukraine and the COVID-19 pandemic, these developments have cast a shadow over the outlook for trade in 2023 and 2024.” The report suggests that: “Trade growth should then pick up to 3.3% in 2024 – nearly unchanged from the previous 3.2% estimate in April – with stable GDP growth of 2.5%. Trade is expected to grow more slowly than GDP this year but faster next year; such swings are not unusual given the relatively large share of business-cycle sensitive investment and durable goods in trade compared to GDP.” It maintained that “the trade slowdown appears to be broad-based, involving a large number of countries and a wide array of goods, specifically certain categories of manufactures such as iron and steel, office and telecom equipment, textiles, and clothing.” However, a notable exception is passenger vehicles, sales of which have surged in 2023, the report said, arguing that “the exact causes of the slowdown are not clear, but inflation, high interest rates, US dollar appreciation, and geopolitical tensions are all contributing elements.” Unlike the United Nations Conference on Trade and Development’s Trade and Development Report 2023, which suggested that the economies of the European Union member countries, particularly Germany, are ailing, thus contributing to a grim outlook, the WTO said: “Risks to the forecast include a sharper than expected slowdown in China and a resurgence of inflation in advanced economies, which would require keeping interest rates higher for a longer period.” The report appears to be hedging its overall assessment by making the following claim, “On the other hand, growth could also exceed expectations if inflation comes down quickly, allowing an early exit from contractionary monetary policies.” “Overall, risks to the current outlook are considered to be evenly balanced between the upside and the downside, although there may be some additional growth potential due to the lower base in 2023. WTO economists do see some signs in the data of trade fragmentation linked to geopolitical tensions, but so far there is no evidence of a broader de-globalization trend that could weigh more heavily on trade,” it said, adding that commodity prices spiked following the start of the war in Ukraine, as the possibility of supply disruptions set off a scramble to secure access to energy products. +
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