WTO: Global trade slows down drastically, recession is closer than ever

The World Trade Organization (WTO) on Wednesday sharply trimmed its global trade growth forecast for 2023 amid high inflation, rising interest rates, surging energy prices, and the Russia-Ukraine war.

World merchandise trade volume is expected to rise 1% in 2023, revised down from the previous projection of a 3.4% growth.

The forecast for 2022 was revised upwards to 3.5%, slightly better than the 3% forecast in April.

The WTO projects import demand to soften as growth slows in major economies.

War-induced high energy prices are expected to cut household spending and raise manufacturing costs in Europe, while in the US monetary policy tightening will hit interest-sensitive spending in areas such as housing, motor vehicles, and fixed investment, the organization said.

It underlined that increasing import bills for fuels, food, and fertilizers could lead to food insecurity and debt distress in developing countries.

“While trade restrictions may be a tempting response to the supply vulnerabilities that have been exposed by the shocks of the past two years, a retrenchment of global supply chains would only deepen inflationary pressures, leading to slower economic growth and reduced living standards over time,” WTO Director-General Ngozi Okonjo-Iweala said.