Russia-Ukraine
Conflict Cuts 2022 Trade Growth by 1.7% to 3.0%
·
WTO Maintains Silence on NATO Trade and Payment Bans
on Russia, says “Dividing World into Blocks not Good for Peace and Prosperity”
·
World GDP at market exchange rates is expected to grow by
2.8% in 2022, down 1.3 percentage points from the previous forecast of 4.1%.
Growth should pick up to 3.2% in 2023, close to the average rate of 3.0%
between 2010 and 2019.
·
Output in the Commonwealth of Independent States (CIS)
region—which excludes Ukraine—is expected to see a sharp 7.9% drop, leading to
a 12.0% contraction in the region's imports.
Prospects for the global economy have darkened since the
outbreak of war in Ukraine on 24 February, prompting WTO economists to reassess
their projections for world trade over the next two years.
·
World merchandise trade volume is expected to
grow 3.0% in 2022 (down from 4.7% previously) and 3.4% in 2023, but these
figures may be subject to revision due to uncertainty about the course of the
conflict in Ukraine.
·
World GDP at market exchange rates is
expected to increase by 2.8% in 2022 after rising 5.7% in 2021. Output growth
should pick up to 3.2% in 2023, assuming persistent geopolitical and economic
uncertainty.
·
The CIS region should see a 12.0% decline in
imports and a 7.9% drop in GDP in 2022, but exports should grow by 4.9% as
other countries continue to rely on Russian energy. Regional disparities may
narrow due to weak import demand in Europe and Asia.
·
The volume of merchandise trade rose 9.8% in
2021. The US$ value of this trade grew 26% to US$ 22.4 trillion. The value of
commercial services trade was also up 15% in 2021 to US$ 5.7 trillion.
·
Services trade will also be affected by the
conflict in Ukraine, including in the transport sector, which covers container
shipping and passenger air transport.
The
organization now expects merchandise trade volume growth of 3.0% in 2022—down
from its previous forecast of 4.7%—and 3.4% in 2023, but these estimates are
less certain than usual due to the fluid nature of the conflict.
The
most immediate economic impact of the crisis has been a sharp rise in commodity
prices. Despite their small shares in world trade and output, Russia and
Ukraine are key suppliers of essential goods including food, energy, and
fertilizers, supplies of which are now threatened by the war. Grain shipments
through Black Sea ports have already been halted, with potentially dire
consequences for food security in poor countries.
The
war is not the only factor weighing on world trade at the moment. Lockdowns in
China to prevent the spread of COVID-19 are again disrupting seaborne trade at
a time when supply chain pressures appeared to be easing. This could lead to
renewed shortages of manufacturing inputs and higher inflation.
"The
war in Ukraine has created immense human suffering, but it has also damaged the
global economy at a critical juncture. Its impact will be felt around the
world, particularly in low-income countries, where food accounts for a large
fraction of household spending," Director-General Ngozi
Okonjo-Iweala said. "Smaller supplies and higher
prices for food mean that the world's poor could be forced to do without. This
must not be allowed to happen. This is not the time to turn inward. In a
crisis, more trade is needed to ensure stable, equitable access to necessities.
Restricting trade will threaten the wellbeing of families and businesses and
make more fraught the task of building a durable economic recovery from COVID‑19,"
the Director-General went on to say.
She
said governments and multilateral organizations must work together to
facilitate trade at a time of sharp inflationary pressures on essential
supplies and growing pressures on supply chains.
"History
teaches us that dividing the world economy into rival blocs and turning our
backs on the poorest countries leads neither to prosperity nor to peace. The
WTO can play a pivotal role by providing a forum where countries can discuss
their differences without resorting to force, and it deserves to be supported
in that mission," she said.
With
little hard data on the economic impact of the conflict, WTO economists have
had to rely on simulations to generate reasonable assumptions about GDP growth
in 2022 and 2023. Current estimates based on the WTO Global Trade Model capture
(1) the direct impact of the war in Ukraine, including destruction of
infrastructure and increased trade costs; (2) the impact of sanctions on
Russia, including the blocking of Russian banks from the SWIFT settlement
system; and (3) reduced aggregate demand in the rest of the world due to
falling business/consumer confidence and rising uncertainty.
World
GDP at market exchange rates is expected to grow by 2.8% in 2022, down 1.3
percentage points from the previous forecast of 4.1%. Growth should pick up to
3.2% in 2023, close to the average rate of 3.0% between 2010 and 2019. Output
in the Commonwealth of Independent States (CIS) region—which excludes
Ukraine—is expected to see a sharp 7.9% drop, leading to a 12.0% contraction in
the region's imports.
Chart
1 shows quarterly world merchandise trade volume estimates through the end of
2023, including error bands indicating confidence intervals associated with the
forecast. Given current GDP assumptions, merchandise trade volume growth in
2022 could be as low as 0.5% or as high as 5.5%. These projections will be
updated in October, but an earlier revision could be issued if incoming data
warrant it. The forecast takes into account higher frequency data for selected
economies, including monthly statistics on container throughput of U.S. and
Chinese ports in order to capture port congestion in these countries.