According to the latest forecast from World Trade Organization (WTO) economists, global trade growth in 2023 is still expected to be subpar despite a slight upgrade to GDP projections since last fall.
Weighed down by the effects of the war in Ukraine, stubbornly high inflation, tighter monetary policy and financial market uncertainty, the volume of world merchandise trade is expected to grow by 1.7% this year, following 2.7% growth in 2022, a smaller-than-expected increase that was pulled down by a sharp slump in the fourth quarter.
The 2.7% increase in world trade volume in 2022 was weaker than the WTO’s October forecast of 3.5%, as a sharper-than-expected quarter-on-quarter decline in the fourth quarter dragged down growth for the year. Several factors contributed to that slump, including elevated global commodity prices, monetary policy tightening in response to inflation, and outbreaks of COVID-19 that disrupted production and trade in China.
The 1.7% forecast for trade growth in 2023, meanwhile, is up from the previous estimate of 1.0% from last October. A key factor here is the relaxation of COVID-19 pandemic controls in China, which is expected to unleash pent-up consumer demand in the country, in turn boosting international trade.