WTO sounds warning on global trade
- Courtenay Brown, author of Axios Macro
A sign of the World Trade Organization (WTO) headquarters in Geneva. (Photo: FABRICE COFFRINI/AFP via Getty Images)
Another day, another downbeat prediction about the global economy.
Driving the news: The World Trade Organization (WTO) today said it expects a sharp slowdown in global trade growth next year as higher prices and higher interest rates weigh on output and demand.
Why it matters: Should the WTO's forecast materialize, that demand drop-off may help ease inflation pressures. But the global economy would also take a hit, heightening the risk of a worldwide recession.
The WTO expects import and export volumes will grow 1% in 2023 — a whopping 2.5 percentage points less than they expected in April.
- Trade flows could grow 3.5% this year, a half-percentage point faster than first estimated, when less data was available. That's down from the 9.7% in 2021.
Officials caution, however, that there is a high degree of uncertainty around their predictions. It's unclear how quickly (and how high) major central banks will raise interest rates. There's also the unpredictable nature of the continued fallout from the Russia-Ukraine war.
- For instance, if downside risks materialize, trade volumes could contract as much as 2.8%. But if conditions are better-than-expected, trade growth could be as high as 4.6%.