The international trade organisation (WTO) increased its forecast for global trade growth in 2023 from 1% in last October to 1.7% on Wednesday, despite concerns over the ongoing conflict in Ukraine, persistently rising inflation, tighter monetary policy, and generalised financial instability.
The WTO stated in a statement that while the outlook for the world economy has slightly improved since its most recent trade forecast was released in October of last year, the pace of trade expansion in 2023 is still predicted to be below average due to the ongoing conflict in Ukraine, persistently high inflation, tighter monetary policy, and financial uncertainty.
If GDP growth accelerates to 2.6% in 2024, trade growth should recover to 3.2%, but this forecast is more conservative. The trade association stated that the situation is more unpredictable than usual due to the presence of significant downside risks, such as escalating geopolitical tensions and global food insecurity.
WTO warned that recent bank failures in the US and Europe show potential future vulnerabilities resulting from a changed interest rate environment, and warned governments and regulators about financial risks in the coming months.
“It was never going to be simple to reverse course on low interest rates, and the road ahead is probably going to be rough. The possibility of larger rate increases could increase if inflation surprises turn out to be positive, but doing so would increase the danger of a wider financial contagion that would harm trade and output, according to the WTO.
