On 05 April 2023, the World Trade Organization (WTO) economists presented a forecast that global trade growth in 2023 was still expected to be subpar despite a slight upgrade to Gross Domestic Product (GDP) projections since last fall. Weighed down by the effects of the war in Ukraine, stubbornly high inflation, tighter monetary policy and financial market uncertainty, the volume of world merchandise trade is expected to grow by 1.7% this year, following 2.7% growth in 2022, a smaller-than-expected increase that was pulled down by a sharp slump in the fourth quarter (Q4).
The WTO's trade projections, set out in the new “Global Trade Outlook and Statistics Report”, estimate real global GDP growth at market exchange rates of 2.4% for 2023. Projections for both trade and output growth are below the averages for the past 12 years of 2.6% and 2.7% respectively.
The 2.7% increase in world trade volume in 2022 was weaker than the WTO's October 2022 forecast of 3.5%, as a sharper-than-expected quarter-on-quarter decline in Q4 dragged down growth for the year. Several factors contributed to that slump, including elevated global commodity prices, monetary policy tightening in response to inflation, and outbreaks of Covid‑19 that disrupted production and trade in the People’s Republic of China (China).
Notably, trade growth last year turned out to be in line with the 2.4% to 3.0% baseline scenario in the WTO's March 2022 initial report on the war in Ukraine, and well above its more pessimistic scenario in which trade would have grown just 0.5% as countries started to split into competing economic blocs. In the event, international markets remained broadly open. A follow-up WTO study released in March 2023 documented how vulnerable economies were able to compensate for essential food supplies cut off by the war by finding alternative products and suppliers.
The 1.7% forecast for trade growth in 2023, meanwhile, is up from the previous estimate of 1.0% from last October. A key factor here is the relaxation of Covid-19 pandemic controls in China, which is expected to unleash pent-up consumer demand in the country, in turn boosting international trade.
Looking ahead to 2024, trade growth should rebound to 3.2%, as GDP picks up to 2.6%, but this estimate is more uncertain than usual due to the presence of substantial downside risks, including geopolitical tensions, food supply shocks, and the possibility of unforeseen fallout from monetary tightening.