GP Short Notes # 675, 9 October 2022
On 5 October, the World Trade Organisation (WTO) released its Trade Statistics and Outlook for the year 2022-2023. The report emphasises the impact of the global economic slowdown on global merchandise trade. The WTO has expressed its concerns that a global trade slowdown can have direct consequences on inflation, the standard of living and economic growth. The report also highlights that with a decrease in the volume of trade, the value of trade has increased due to high prices.
First, the report provides a revised projection for 2022 and 2023. The projection of the global merchandise trade growth rate for 2022 is 3.5 per cent and 1.0 per cent for 2023 which previously was set at 3.4 per cent. Similarly, the world GDP at market exchange rates is expected to rise by 2.8 per cent in 2022 and 2.3 per cent in 2023 which was previously set at 3.2 per cent. The reasons for this revision have been attributed to high energy prices, inflation, and the Russia-Ukraine war.
Second, there is a direct impact of the Russia-Ukraine war on global trade. The data shows that the war has had a direct effect on the prices of crucial commodities. In August global energy prices had risen by 78 per cent year-on-year, grain prices had risen by 15 per cent year-on-year and wheat prices had risen by 18 per cent. Prices of fertilisers had also risen by 60 per cent year-on-year which raises concerns for future crop yields and their effect on a potential increase in food insecurity.
Third, global trade experienced different gains and losses in different regions. In 2022 the Middle East saw the largest increase in both export and import trade. Export trade grew by 14.6 per cent and import trade grew by 11.1 per cent. The CIS region or Eastern Europe and Asia saw a huge contraction in both export and import trade in 2022. Export trade grew by -5.8 per cent and import trade grew by -24.7 per cent. This has been attributed to the sanctions placed on Russia, which these countries depend upon for trade infrastructure.
Fourth, there are three factors which can change these figures. WTO has identified three main factors which have the potential to change these figures. First is the interest rate manipulation by central banks. This is done to control inflation but if it goes too far it can induce a recession and affect imports and investments. Second is the intensification of the Russia-Ukraine war which can disrupt the global economy. The third is the dissociation of major economies from the global supply chain. This can happen when countries decide to decrease the production of goods which will increase supply scarcity.