• June 12, 2024
Global trade growth forecast for 2023 slows down to 1%

In 2022, the World Trade Organisation (WTO) predicted that the amount of global merchandise trade would increase by 3.5%, which is somewhat higher than the 3.0% forecast made in April.

Despite the devastating pandemic, global trade also continued grow. According to current statistics from the DHL Commerce Growth Atlas, which monitors trends of global trade, the amount of goods traded internationally has grown by up to 10% compared to pre-COVID-19 levels.

WTO lowers its forecast for global trade in 2023

However, due to global uncertainty, the WTO now predicts the increase in world commerce is anticipated to drop to 1% in 2023.

According to a statement from the multilateral organisation, several shocks are projected to weigh on the global economy, which will cause momentum in world commerce to wane in the second half of 2022 and stay muted in 2023.

WTO analysts forecast that the amount of global goods trade will expand by 3.5% in 2022 — somewhat better than the forecast of 3% in April. For 2023, however, they envisage a 1% growth — down considerably from the previous estimate of 3.4%.

The prediction may not bode well for Singapore, whose primary source of income is international trade. Equipment and machinery are the main exports. Additionally, the nation exports oil bunkers, chemical products, various manufactured goods, and petroleum.

Increasing prices of goods and inflation

The WTO predicts that when growth slows in important economies for various reasons, import demand will slacken.

High energy costs in Europe as a result of Russia’s invasion of Ukraine will reduce family expenditure and increase manufacturing expenses.

The tightening of monetary policy in the United States will have an impact on spending in industries where interest rates are significant, such as homes, automobiles, and fixed assets.

Along with sluggish foreign demand, COVID-19 breakouts and production interruptions are still a problem for China.

Implications for developing countries

As import costs for gasoline, food, and fertiliser rise, developing nations may experience food insecurity and debt hardship. This is another effect of the conflict in Ukraine. According to the estimate, overall energy price increases in August increased by 78% from the previous year.

Food costs climbed by 11%, grain costs by 15%, and fertiliser costs by 60%.

In recent months, a lot of currencies have depreciated against the dollar, which is another factor raising the price of food and fuel.

“What we need is a deeper, more varied, and less concentrated basis for manufacturing products and services,” said Ngozi Okonjo-Iweala, the director-general of the WTO. By reducing susceptibility to extreme weather events and other localised disruptions, this would support supply resilience and long-term price stability in addition to fostering economic development.

What more can we expect?

Global trade is critical to several nations and has a number of benefits to economic growth. So, what happens if it slows down?

One of the most immediate effects of the global trade slowdown will be a decline in economic growth. This is because trade is an important driver of economic growth; when trade slows down, so does economic growth. This would greatly affect trading-dependent or export-oriented nations.

Another significant effect of the global trade slowdown will be an increase in unemployment. This is due to the fact that firms tend to lay off employees when trade declines in order to reduce expenses. This has been seen in a number of countries, particularly in manufacturing-intensive economies such as China and South Korea.

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