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WTO cuts global trade growth forecast by half

The World Trade Organization (WTO) forecasts that global trade growth in 2023 will only reach 0.8%, down by half compared to before.

In April, the WTO said that global trade growth this year could reach 1.7%. However, rising interest rates reduced consumer spending in the US, Europe and Asia, causing the 164-member organization to adjust its forecast sharply. Some other disadvantages include the tense Chinese real estate market and the conflict in Ukraine.

The WTO said the trade recession was widespread, involving many goods, especially iron and steel, office and telecommunications equipment, and textiles. Automobiles, meanwhile, are the notable exception, with sales soaring this year.

In an interview with The Guardian on October 5, Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva assessed that there had been progress in the fight against inflation, but the risk of high-interest rates still lingers.

"This is not done yet, and it raises questions about the possibility of high-interest rates remaining, certainly into 2024 and possibly into 2025. So the growth outlook is weak, and financial conditions are tighter ", she commented.

Yangshan deep-water port in Shanghai, China on October 19, 2020. Photo: Reuters

The bloc's largest exporter, Germany, continued to record poor results in Europe. According to data from the German Statistics Agency (Destatis), the country's exports decreased by 1.2% in August, while imports decreased by 0.4%. Analysts at ING said the decline in trade increases the risk that the German economy will fall back into recession in the third quarter of this year.

The WTO's trade forecast is similar to the IMF and World Bank assessment ahead of the fall general meeting in Marrakech (Morocco) next week. Both organizations will likely downgrade their global economic growth forecasts due to signals that central banks will keep interest rates high for longer to contain inflation.

An optimistic assessment by the Washington-based Peterson Institute suggests that most of the world's economy will recover strongly next year after inflation falls again, creating conditions for lower interest rates and a push to promote growth.

After reaching 3.4% in 2022, global GDP growth is forecast to be 3% this year and 2.8% in 2024. The WTO says next year's GDP will be supported by a growth of 3.3% in commercial activities, unchanged from the April forecast.

Acknowledging that there are signs of trade conflicts around the world, leading to sanctions and blockades of goods, the WTO said there is no evidence of a large-scale de-globalization trend, which could threaten their 2024 forecast.

WTO Director-General Ngozi Okonjo-Iweala said the decline in trade was worrying because it could reduce people's living standards, especially in developing countries. "Global economic fragmentation will make these challenges worse," she said.

The WTO's forecast does not include services, but the organization said growth in this sector is also slowing after a strong recovery in international tourism in 2022. Specifically, global services increased by 9% in the first quarter of 2023, down from 19% in the second quarter of 2022.

Also read: Firms cautioned about potential trade measures

Trade deficit with China grows as imports soar

Trade deficit returns in May

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