WTO slashes expansion forecast for global trade
PremiumThe WTO said the prospects of global growth in merchandise trade have ‘darkened’ since the war, with covid-19 lockdowns in China piling on the stress on the global supply chain
NEW DELHI : The Russia-Ukraine war could touch off food shortages in poor countries, the World Trade Organization warned on Tuesday as it slashed its global trade growth forecast for the year to 3% from 4.7% earlier.
The WTO said the prospects of global growth in merchandise trade have “darkened" since the war, with covid-19 lockdowns in China piling on the stress on the global supply chain.
The international trade watchdog warned that lockdowns in China, which has a harsh zero-tolerance approach to the pandemic, could lead to renewed shortages of manufacturing inputs and higher inflation by disrupting seaborne trade.
“The organization now expects merchandise trade volume growth of 3% 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," it said in a statement.
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, WTO said.
“Grain shipments through Black Sea ports have already been halted, with potentially dire consequences for food security in poor countries," the Geneva-based body added.
Prime Minister Narendra Modi, during his conversation with US President Joe Biden on Tuesday, said India is ready to supply food to the world if the WTO permits. The WTO anticipated that higher oil prices may reduce real incomes and import demand worldwide, and higher natural gas prices would probably have an even greater impact in Europe.
WTO Director-General Ngozi Okonjo-Iweala appealed to countries to avoid turning inwards, saying more trade is needed to ensure stable, equitable access to necessities. “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. Restricting trade will threaten the well-being of families and businesses and make more fraught the task of building a durable economic recovery from covid-19," Okonjo-Iweala said.
The impact of the war is being felt across the globe in terms of rising inflation, but low-income countries, where food accounts for a large fraction of household spending, are suffering the most, she added.
Risks to the forecast are mixed and difficult to assess objectively, the WTO said, adding that there is some upside potential if the war in Ukraine ends sooner than expected but substantial downside risks if fighting persists for a long time or escalates.
The WTO anticipated that the Western sanctions on Russian businesses and individuals would likely have a strong effect on commercial services trade as Russia is a net services importer, with imports in 2021 valued at $74 billion and exports totalling $55 billion. World merchandise trade rose 26% in 2021, with export and import prices jumping 15% for the year on average, WTO said. The dollar value of trade in fuels and mining products was up 59%, agricultural products up 19%, and manufacturing goods up 21%.