Written by Philip Blenkinsop
BRUSSELS (Reuters) – The World Trade Organization's chief economist cuts forecasts for goods trade growth in 2023 and 2024, citing the weaker global economy and the potential impact of disruptions to shipping through the Suez Canal. He said it is likely.
In October, the WTO predicted merchandise trade growth would be 0.8% in 2023 and 3.3% in 2024. But it now believes this year's growth is threatened by geopolitical tensions, such as the impact on the Suez Canal from attacks on ships in the Red Sea. by the Iranian-backed Houthis in Yemen.
Ralph Ossa, the WTO's chief economist, told Reuters on Monday that both annual growth forecasts seemed “too optimistic” at this point. The WTO is expected to release updated figures in about two months.
Ossa said merchandise trade in the first three quarters of 2023 was down 1.4% year-on-year, but the fourth quarter looked slightly stronger.
“At this point, it looks like the growth rate (in 2023) will be less than 0.8%. I don't know if it will be positive or negative,” he said. Europe's performance was worse than expected, and China's post-COVID-19 recovery was not as strong as expected.
Global merchandise trade has increased every year for the past decade, with the exception of 2020, the worst of the COVID-19 pandemic.
Ossa said many international organizations have revised downward their 2024 GDP growth forecasts, which will likely have a knock-on effect on the WTO's own trade forecasts. However, he said merchandise trade should still be stronger this year than in 2023.
“Certainly we are facing all these headwinds to international trade…but we must also remember the bigger picture that both the global economy in general and international trade in particular are incredibly resilient. No,” Ossa said.
He also highlighted that trade in services continued to expand due to the proliferation of digitally distributed services, increasing by 9% year-on-year in the first half of 2023.
Ossa said that after the initial shock to supply chains from the Suez Canal disruption, the most likely impact would be higher prices for consumers due to higher transport costs.
Ossa said that if the turmoil continues, there will be a detectable inflationary impact in Europe, but it is likely to be a decimal percentage point rather than an extreme shock.
(Reporting by Philip Blenkinsop; Editing by Mark Heinrich)
