The World Trade Organization has halved its forecast for global trade growth this year in response to rising interest rates that have dented consumer spending power in the US, Europe and Asia.
The 164-member trade body slashed its estimate from April that predicted the global trade in goods would grow by 1.7% in 2023, saying it needed to be scaled back to 0.8%.
Persistent inflation had kept interest rates higher for longer than expected in most trading nations, the WTO said, while a strained Chinese property market and the war in Ukraine also cast a shadow over its outlook.
The Geneva-based body said the slowdown was broad-based, involving a wide spectrum of goods, though particularly iron and steel, office and telecoms equipment, textiles and clothing.
Cars were a notable exception, with surging sales this year compensating for chronic shortages that had limited shipments during the pandemic.
Separate figures released on Thursday showing a drop in German exports highlight how trade in Europe’s largest member has weakened this year. German exports fell by 1.2% in August, according to figures from the statistics body Destatis, while imports fell by 0.4%.
The drop in trade increases the risk that Germany’s economy will fall back into recession in the third quarter of this year, analysts at ING said.
The WTO outlook comes ahead of similar assessments next week of the global economy by the International Monetary Fund (IMF) and the World Bank at their joint autumn meeting in Marrakech.
Both organisations are likely to downgrade their economic growth forecasts on the back of signals from central banks that they will be forced by inflationary pressures to keep interest rates elevated for longer than expected.
An optimistic assessment by the Washington-based Peterson Institute showed most of the world recovering strongly next year after a fall back in inflation that eased interest rates and spurred growth.
However, China’s indebted property market and crackdown on tech and consulting firms have deterred trade while the Ukraine war has dented the sales of foodstuffs and essential metals.
After growing 3.4% in 2022, the global economy was projected to expand 3% in 2023 and 2.8% in 2024.
The WTO said growth next year would be supported by a bounce-back in trade to 3.3%, which is unchanged from its April forecast.
There were signs of trade battles across the world leading to sanctions and blockades of goods, it said, but there was no evidence of a broader de-globalisation that could threaten its 2024 forecast.
The WTO’s director general, Ngozi Okonjo-Iweala, said the expected slowdown of trade was a cause for concern because it could depress the living standards of people around the world, particularly in poor countries. “Global economic fragmentation would only make these challenges worse,” she said
The forecast does not cover services, but the WTO said growth was moderating after a strong rebound in international tourism in 2022. Global commercial services trade rose 9% in the first quarter of 2023, down from 19% in the second quarter of 2022, it said.
