In its latest trade forecast released on October 5th, the World Trade Organization (WTO) has adjusted its projections for global merchandise trade growth in 2023, reflecting a persistent slowdown that commenced in the fourth quarter of 2022. The revised estimate anticipates a modest growth rate of 0.8% for this year, a considerable reduction from the 1.7% increase forecasted in April. Meanwhile, the projection for 2024 remains relatively stable at 3.3%. Additionally, the WTO expects real world GDP to grow by 2.6% at market exchange rates in 2023, followed by a 2.5% growth rate in 2024, as outlined in the "Global Trade Outlook and Statistics — Update: October 2023."
The decline in world trade and output became evident in the fourth quarter of 2022, with the United States, the European Union, and other regions experiencing the impact of persistent inflation and tighter monetary policies. This slowdown was exacerbated by challenges in China's property markets, hindering a more robust post-COVID-19 recovery. Alongside these factors, the conflict in Ukraine has cast a shadow over the global trade outlook, affecting numerous countries and a wide range of goods.
Looking ahead, trade growth is expected to rebound in the following year, accompanied by gradual and stable GDP growth. Sectors sensitive to business cycles are projected to stabilize and recover as inflation subsides and interest rates decline. However, there are emerging signs of supply chain fragmentation, which could pose a threat to the relatively positive outlook for 2024. Notably, the share of intermediate goods in world trade, an indicator of global supply chain activity, declined to 48.5% in the first half of 2023, compared to an average of 51.0% over the previous three years. Furthermore, the share of Asian bilateral partners in US trade in parts and accessories—essential components of intermediate inputs—decreased to 38% in the first half of 2023, down from 43% in the same period of 2022.
Ngozi Okonjo-Iweala, Director-General of the WTO, expressed concern over the projected trade slowdown in 2023, emphasizing its adverse implications for global living standards. She called for WTO members to strengthen the global trading framework by avoiding protectionism and fostering a more resilient and inclusive global economy. Okonjo-Iweala emphasized the importance of a stable, open, predictable, rules-based, and fair multilateral trading system for global economic recovery, particularly for disadvantaged nations.
Ralph Ossa, Chief Economist of the WTO, noted that while there are signs of trade fragmentation linked to geopolitical tensions, broader deglobalization has not yet materialized. Ossa highlighted that goods continue to be produced through complex supply chains, with some indications that the extent of these chains may have temporarily plateaued. He anticipates a return to positive export and import volume growth in 2024 but underscored the need for vigilance.
It's important to note that the WTO's trade forecast does not cover world commercial services trade. Preliminary data, however, suggest a moderation in growth in the sector, following robust rebounds in transport and travel in the previous year. World commercial services trade witnessed a 9% year-on-year increase in the first quarter of 2023, compared to a 19% year-on-year rise in the second quarter of 2022.