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The World Trade Organization has halved its estimate for exports growth around the world this year as manufacturing industries are hit by a slowdown and rising geopolitical tensions cause trade patterns to fragment.
The Geneva-based intergovernmental organisation said on Thursday that it expected the volume of world merchandise trade to grow by just 0.8 per cent, down from a 1.7 per cent increase which it had forecast in April.
Ngozi Okonjo-Iweala, WTO director-general, expressed concern over the projected slowdown and its implications for global living standards. She emphasized the negative consequences of global economic fragmentation and called for WTO members to resist protectionism.
In the first half of 2023, the share of intermediate goods in world trade, which serves as an indicator of global supply chain activity, fell to 48.5 per cent, compared to an average of 51 per cent over the previous three years, according to the WTO.
As tensions between Washington and Beijing escalate, the share of Asian bilateral partners in US trade in parts and accessories declined to 38 per cent in the first half of 2023, from 43 per cent in the same period of 2022.
While WTO chief economist Ralph Ossa stated that broad deglobalisation is not yet a reality, he cautioned that the extent of global supply chains may have plateaued.
The downturn in global goods exports and imports that began at the end of last year has continued, with global trade volumes falling by an annual rate of 3.2 per cent in July 2023, according to the Netherlands Bureau for Economic Policy Analysis (CPB).
The WTO attributed this trend to high inflation and borrowing costs impacting demand in advanced economies, as well as a strained property market in China. The organization also highlighted a “global manufacturing slowdown” coinciding with the trade weakness.
The WTO’s report underscored the broad-based nature of the trade slowdown, affecting numerous countries and various categories of manufactures such as iron and steel, office and telecoms equipment, textiles, and clothing.
One exception to the trade slump was the surge in passenger vehicle sales in 2023, following supply chain disruptions during the pandemic.
The WTO predicts a contraction in import volumes in North and South America, Europe, and Asia this year. Meanwhile, exports are expected to remain largely stagnant in Asia and Europe, with North America displaying the strongest growth.
Positive growth is anticipated in most regions in 2024, particularly in Asia, according to the WTO. The organization expects global goods trade to grow by 3.3 per cent next year, a figure unchanged from its April estimate.
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