WTO Cuts 2023 Global Trade Growth Forecast to 0.8%

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On Thursday, the World Trade Organization (WTO) revised its growth projection for world merchandise trade volume for 2023, more than halving it to 0.8 percent from the previous 1.7 percent forecast in April. The ongoing decline in goods trade has led to a pessimistic outlook, significantly below the average annual growth of 2.6 percent seen since the global financial crisis. This diminished forecast is a concerning sign for Indian exports, which have been contracting for seven consecutive months until August in value terms.

However, the WTO marginally increased its forecast for goods trade in 2024 to 3.3 percent from the earlier estimate of 3.2 percent.

The biannual Global Trade Outlook released by the WTO highlighted that the trade slowdown appears to be widespread, affecting numerous countries and various categories of manufactured goods, such as iron and steel, office and telecom equipment, textiles, and clothing. While the exact reasons for the slowdown remain unclear, the report pointed to factors like inflation, high interest rates, US dollar appreciation, and geopolitical tensions contributing to the situation.

According to the WTO report, the risks to the current forecast include the possibility of a sharper-than-expected slowdown in China and a resurgence of inflation in advanced economies, necessitating the maintenance of higher interest rates for an extended period. On the other hand, a quicker decline in inflation could lead to better-than-expected growth, allowing for an early exit from contractionary monetary policies. Overall, the report suggested that risks to the current outlook are evenly balanced.

The report also indicated that while merchandise trade volume was down 0.5 percent year-on-year (Y-o-Y) in the first half of 2023, a modest recovery is anticipated in the second half of the year. North America recorded the fastest export growth in the first half of the year among all regions, followed by South America, Africa, Europe, West Asia, Asia, and the Commonwealth of Independent States (CIS) region.

The report mentioned that Asia’s export growth is expected to turn positive in the second half of the year, while Europe’s is likely to slip into negative territory. It also highlighted that India’s merchandise exports contracted 8.1 percent in the first half of 2023, and merchandise imports shrank 7.75 percent during the same period.

WTO anticipated a resumption of positive export and import volume growth in 2024 across most regions, except for the CIS, where imports are expected to decline after a strong rebound in 2023. If the 2024 forecast materializes, Asia is poised to be the fastest-growing region for both exports and imports.

Additionally, the report noted that India’s commercial services exports and imports increased by 23 percent and 8 percent, respectively, during the first half of 2023. The WTO report acknowledged the ongoing economic and political tensions between the United States and China, which have resulted in the imposition of numerous tariffs. Despite these developments, there is limited evidence to suggest that globalization has been significantly reversed as a consequence of these measures.