Global growth in the volume of trade in goods will increase by 3% this year, compared to its previous forecast of 4.7% and 3.4% for 2023. However, the estimates are less certain than usual due to the dynamics of the war between Ukraine and Russia. Randall Castillo Ortega, a global trade specialist, breaks down the different growth possibilities in global trade and what is coming to the industry.
This year’s global import growth will be 3.9% in North America, 4.8% in South America, and 3.7% in Europe. The immediate economic impact of the crisis was a sharp rise in commodity prices.
Despite their small participation in world trade and production, Russia and Ukraine are key suppliers of essential products, such as food, energy and fertilizers, whose supply is now threatened by war. Shipments of cereals through the ports of the Black Sea have already been interrupted, with negative consequences for the food security of the countries with the highest poverty rate.
War is not the only factor that weighs on world trade at the moment. The blockades in China to prevent the spread of COVID-19 are once again disrupting trade, at a time when supply chain pressures seem to be decreasing. This could lead to a new shortage of inputs for manufacturing and higher inflation.
With little concrete data on the economic impact of the conflict, it has been necessary to develop simulations to generate reasonable assumptions about GDP growth for the next two years. Explains Castillo, “Current estimates, based on the WTO Global Trade Model, reflect the direct impact of the war in Ukraine, including the destruction of infrastructure and the increase in trade costs, in addition to the impact of sanctions on Russia, including the blocking of the SWIFT settlement system by Russian banks. In addition, they also reflect the reduction of aggregate demand in the rest of the world, due to the fall in business and consumer confidence.”
With these assumptions, world GDP at market exchange rates is expected to grow by 2.8% in 2022, which represents a decrease of 1.3 percentage points compared to the previous forecast of 4.1%. Growth is expected to rebound to 3.2% in 2023, close to the average rate of 3.0% between 2010 and 2019.
Production in the Commonwealth of Independent States (CIS) region – which excludes Ukraine – is expected to experience a sharp drop of 7.9%, which will lead to a contraction of 12.0% in imports from the region. Taking into account the current GDP assumptions, the growth in the volume of trade in goods this year could be as low as 0.5% or as high as 5.5%. These forecasts will be updated in October, but a previous revision could be published if the incoming data justifies it.
Castillo adds that there was a sharp rebound in trade volumes in 2021 after the fall caused by the 2020 pandemic. However, growth could have been greater if there hadn’t been recurrent waves of COVID-19 throughout the year. Except for Asia, where exports increased by 13.8%, all regions experienced lower growth than the 9.8% world average. On the import side, North America, South America and the CIS all registered above-average growth.
For 2022, the forecast predicts a 3.4% increase in North American exports; -0.3% South America; 2.9% Europe; 4.9% in the CIS and 1.4% Africa; 11.0% for the Middle East; 2.0% Asia. In 2022, the export and import volumes of the least developed countries should increase by 3.5% and 6.6%, respectively.
With the exception of the Middle East, all regions have seen the forecasts for 2023 revised downwards. Trade costs should increase in the short term as a result of sanctions, export restrictions, energy costs and transport interruptions due to COVID-19.