GENEVA — The World Trade Organization is predicting global trade volumes will grow a lackluster 1% next year as crises and challenges weigh on markets, including high energy prices, rising interest rates and uncertainties about Chinese manufacturing output amid the lingering COVID-19 pandemic.
The Geneva-based trade body said Wednesday that the amount of goods shipped between countries are expected to rise 3.5% this year, up from the 3% that WTO anticipated in its first forecast for the year in April.
In 2023, the prediction is for such trade volumes to grow just 1%, down from the 3.4% expected previously.
“The risks are certainly to the downside” next year, WTO Director-General Ngozi Okonjo-Iweala told reporters at its headquarters.
This year, the higher predicted increase in trade volumes stems from better data that arrived in the middle of the year, contributing to a clearer forecast, and a boom in trade volumes from oil- and gas-producing countries in the Middle East as supplies from Russia were shunned and consuming countries sought alternative sources, WTO economists say.
The WTO laid out several factors weighing on trade, including higher energy prices resulting from Russia’s war in Ukraine, which prompted a number of countries — including European Union members that are big consumers of Russian oil and gas — to slap economic sanctions on Moscow.
“Today, the global economy faces a multipronged crisis,” Okonjo-Iweala said. “Monetary tightening is weighing on growth across much of the world, including in the United States. In Europe, high energy prices are squeezing households and businesses. And in China, COVID-19 outbreaks continue to disrupt production and ordinary economic life.”
“Low-income developing countries in particular face serious risks from food insecurity and debt distress,” she added.
While global trade has rebounded from a deep slump in the early days of the COVID-19 pandemic, U.S. Federal Reserve and other central bank moves to choke off inflation through higher interest rates are likely to have knock-on effects for crucial spending in areas like housing, motor vehicle sales and bond prices, WTO says.
The trade body said, however, that new information from purchasing managers, on final goods prices, and an index of input prices suggested that inflationary pressures “may have peaked” — a factor that could influence decision-making from central bankers in the months ahead.
Shrinking demand and the continued fallout from the pandemic is likely to crimp exports out of China, the world’s manufacturing powerhouse, the WTO said.
WTO senior economist Coleman Nee said Russia hasn’t reported its trade figures to the global trade body since January, clouding the picture about how Russian export and import activities were faring. The WTO said Confederation of Independent States countries — made up of most of the former Soviet states — saw quarter-on-quarter exports drop nearly 10.5% in the second quarter.