WTO Slashes Global Trade Forecast for 2023 to 1%

Estimate for 2022 revised upwards to 3.5% but growth expected to lose momentum in second half

Indian exporters need to brace up for more struggle in the new year as world merchandise trade volume growth is likely to slow to 1 per cent in 2023, down from the previous forecast of 3 per cent made in April this year, per fresh estimates released by the WTO on Wednesday. This is due to multiple shocks including the Ukraine war, high energy prices, inflation, and monetary tightening, it said.

Trade growth to slowdown

While global trade in goods in 2022 is now predicted to grow at 3.5 per cent--better than the 3 per cent estimated in April--it is expected to lose momentum in the second half of 2023, the report pointed out.

Slowdown in exports is expected in 2023 as import demand is likely to soften in major economies with growth slowing down for different reasons. “In Europe, high energy prices stemming from the Russia-Ukraine war will squeeze household spending and raise manufacturing costs.

In the United States, monetary policy tightening will hit interest-sensitive spending in areas such as housing, motor vehicles and fixed investment,” the WTO report said. China’s continued struggle with COVID-19 outbreaks and production disruptions paired with weak external demand has also been identified as a major factor for trade growth slowing down. Growing import bills for fuels, food and fertilizers could lead to food insecurity and debt distress in developing countries, the report warned.

India’s Sept exports drop

In India, exporters are already facing the fallout of a deceleration in global demand. The country’s exports declined by 3.52 per cent to $32.62 billion in September 2022, while the trade deficit widened to $26.72 billion, per preliminary data released by the Commerce Department earlier this month. Although exports during April-September 2022-23 increased by 15.54 per cent to $229.05 billion, growth in July and August have been marginal.

The decline in exports of engineering goods, apparels and textiles sectors was of particular concern as these sectors are key to huge employment, according to exporters’ body FIEO.

Forecast

The WTO’s current forecast of 3.5 per cent growth in the volume of world merchandise trade in 2022 is slightly higher than previous estimate of 3 per cent mostly due to statistical revisions and the availability of new data, the report said

The Middle East is expected to record the strongest export growth of any WTO region this year (14.6 per cent), followed by Africa (6 per cent), North America (3.4 per cent), Asia (2.9 per cent), Europe (1.8 per cent) and South America (1.6 per cent). In contrast, CIS exports are estimated to decline by 5.8 per cent this year.