WTO "High Interest Rate Impact... This Year's Trade Growth Lower Than 10-Year Average"

The World Trade Organization (WTO) forecasted that the global trade growth rate will significantly slow down this year as rising interest rates and recent banking crises add new burdens to the world trade environment, which has already been hit by protectionism.

On the 5th (local time), the WTO projected in a report that the global merchandise trade growth rate will reach 1.7% this year. This is a slowdown compared to last year’s 2.7%, when global supply chains were severely disrupted due to the Ukraine war and economic and financial sanctions against Russia, and is also much lower than the average growth rate of 2.6% over the past decade.

The WTO stated, "Merchandise trade will be activated this year as consumer demand recovers with the easing of COVID-19 restrictions in places like China, but the expansion pace will be limited."

In October last year, the WTO had forecasted that the merchandise trade growth rate for this year would be only 1%. The increase of 0.7 percentage points in the forecast about six months later reflects consideration of the revival in consumer demand, but the WTO explained that this figure is still below the 12-year average merchandise trade growth rate of 2.6%.

Economic growth rates are also expected to be lower than usual. The WTO predicted that the global real Gross Domestic Product (GDP) growth rate this year will be 2.4%, lower than the 12-year average of 2.7%.

The report analyzed that the slow growth rates in trade and production sectors this year are due to "the ongoing Ukraine war, high inflation rates, tightening policies by various countries, and uncertainties in financial markets."

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Ralph Ossa, the WTO’s Chief Economist, pointed out, "The high-intensity tightening by central banks worldwide that began last year has exposed vulnerabilities in the banking sector, which could lead to broader financial instability," and added, "Governments and regulatory authorities need to be vigilant about such risks in the coming months."

He also added, "The impact of the COVID-19 pandemic and the escalating geopolitical tensions divided between the U.S. and China were major factors affecting trade and production last year, and this situation is unlikely to change this year."

The report forecasted that merchandise trade growth will rebound to 3.2% next year but added, "This prediction is uncertain due to various risk factors."

Furthermore, it stated, "If countries around the world deepen trade competition by dividing into blocs, the trade growth rate would be only 0.5%, and such risk concerns still remain," adding, "If the gas supply issue is not resolved, it will be difficult to rule out the possibility of gas price increases in Europe next winter as well."

Meanwhile, Ngozi Okonjo-Iweala, WTO Director-General, said, "Although the merchandise trade growth outlook for this year is pessimistic, the digital services sector, including Over-The-Top (OTT) services and education, is growing at an astonishing pace, making the service trade outlook bright this year."

This content was produced with the assistance of AI translation services.