Economists from the World Trade Organization (WTO) scaled back projections for growth in global merchandise trade in 2023 amid a continued slump that began in the fourth quarter of 2022.
According to the latest WTO trade forecast released last week the volume of world merchandise trade is now expected to grow by 0.8% this year, less than half the 1.7% increase forecasted in April. The 3.3% growth projected for 2024 remains nearly unchanged from the previous estimate.
World trade and output slowed abruptly in the fourth quarter of 2022 as the effects of persistent inflation and tighter monetary policy were felt in the United States, the European Union and elsewhere, and as strained property markets in China prevented a stronger post COVID-19 recovery from taking root. Together with the consequences of the war in Ukraine, these developments have cast a shadow over the outlook for trade. The trade slowdown appears to be broad-based, involving a large number of countries and a wide array of goods.
Trade growth should pick up next year accompanied by slow but stable GDP growth. Sectors that are more sensitive to business cycles should stabilize and rebound as inflation moderates and interest rates start to come down. However, signs are starting to emerge of supply chain fragmentation, which could threaten the relatively positive outlook for 2024. For example, the share of intermediate goods in world trade, an indicator of global supply chain activity, fell to 48.5% in the first half of 2023, compared to an average of 51.0% over the previous three years. Furthermore, the share of Asian bilateral partners in US trade in parts and accessories a key subset of intermediate inputs fell to 38% in the first half of 2023, down from 43% in the same period of 2022.
The full report is available here.