EconomyWTO cuts growth forecast to 3% as Ukraine war...

WTO cuts growth forecast to 3% as Ukraine war disrupts global trade

The World Trade Organization has cut its goods trade growth forecast for this year by about a third to 3 per cent, warning that the decline in commodity exports caused by the Ukraine war could cause mass hunger in developing countries.

The Geneva-based body revised predicted growth in goods trade volumes down from 4.7 per cent, but said a protracted conflict and an embargo on Russian energy supplies could reduce it to 0.5 per cent.

The WTO also cut forecasts for growth in gross domestic product from 4.1 per cent to 2.8 per cent in 2022, rising to 3.2 per cent in 2023. It also warned that lockdowns in Chinese cities to prevent the spread of coronavirus are again disrupting seaborne trade.

The conflict between Russia and Ukraine, big exporters of grain and fertiliser, could cause widespread hunger, said WTO director-general Ngozi Okonjo-Iweala as she warned against export restrictions or food hoarding.

“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,” she said. Around 35 countries in Africa import food and 22 import fertilisers from Ukraine, Russia or both. Wheat prices in some states in sub-Saharan Africa could rise by up to 85 per cent without intervention, the WTO said.

Charts showing world goods trade volume index

Okonjo-Iweala called for humanitarian corridors to allow grain to leave Ukraine by truck or ship and for farmers to be able to work. “Eighty per cent of Ukraine’s wheat is harvested in July. That’s the winter crop and we hope there can be some kind of humanitarian cover so this can be harvested and they can plant the next crop in September. The ability to harvest that winter crop will be highly significant.”

She also repeated a call for countries with grain stocks to sell them internationally to reduce prices.

Between them, Russia and Ukraine in 2019 supplied around 25 per cent of wheat, 15 per cent of barley and 45 per cent of sunflower product exports, used in animal feed, according to the WTO.

The WTO estimated a 3.4 per cent rise in trade volumes in 2023 but warned the numbers “are less certain than usual”.

Charts showing goods exports and imports by region

Global trade contracted by 5 per cent in 2020 but rebounded by 9.8 per cent in 2021, as consumers shifted to buying more goods as spending on services was limited by Covid-19 restrictions. Before the war in Ukraine, trade was expected to grow at a robust pace this year supported by savings that households in many countries had accumulated.

However, surging inflation, which squeezes households’ real income, and further supply chain disruptions have drastically changed the outlook.

The WTO forecasts that exports will contract in South America this year, while Asia is forecast to see export growth slowing to 2 per cent from 14 per cent in 2021. Exports growth is expected to more than halve in Europe compared with last year, while North America and Middle East oil exporting countries are set to see above average growth rates.

The CIS region that includes Russia is forecast to see a big drop in imports and GDP this year, but exports should grow by 4.9 per cent as other countries continue to rely on the country’s energy.

The WTO’s forecast anticipates the global economic outlook published later this month by the IMF.

The negative impact of the war on trade was laid bare by separate figures published this month by the Kiel Institute for the World Economy, which tracks shipping data from 500 ports in real time to create a global trade index. The company reported that the value of global trade fell 2.8 per cent between February and March, with Russia and the EU registering the sharpest contractions.

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