Global trade growth in 2023 will slow to 1.7 per cent, the World Trade Organization (WTO) said in its annual trade statistics and outlook report, published on Wednesday.

The volume of world merchandise trade has been weighed down by the effects of the conflict in Ukraine, high inflation, tighter monetary policy and financial market uncertainty, the report said.

However, the forecast for trade growth in 2023 is up from the previous estimate of 1.0 per cent from last October. China’s adjustment of its COVID-19 measures is a “key factor” in this increase, the report said. The reopening of China is expected to boost international trade, the report said.

Dragged down by a sharp slump in the fourth quarter, world trade volume grew by 2.7 per cent, “a smaller-than-expected increase”.

chinese new year

This photo taken on Jan. 20, 2023 shows One World Trade Center displaying patterns for Chinese Lunar New Year, in New York, the United States. (Photo by Winston Zhou/Xinhua)

According to WTO economists, the global GDP at market exchange rates will grow by 2.4 per cent in 2023. Meanwhile, projections for trade and GDP growth in 2023 are below the averages for the past 12 years, of 2.6 per cent and 2.7 per cent respectively.

“The lingering effects of COVID-19 and the rising geopolitical tensions were the main factors impacting trade and output in 2022, and this is likely to be the case in 2023 as well,” said Ralph Ossa, WTO Chief Economist.

Interest rate hikes in advanced economies have also revealed weaknesses in banking systems that could lead to wider financial instability if left unchecked, he said.

“Governments and regulators need to be alert to these and other financial risks in the coming months,” he added.

“Trade continues to be a force for resilience in the global economy, but it will remain under pressure from external factors in 2023. This makes it even more important for governments to avoid trade fragmentation and refrain from introducing obstacles to trade,” WTO Director-General Ngozi Okonjo-Iweala said.

“Investing in multilateral cooperation on trade, as WTO members did at our Twelfth Ministerial Conference last June, would bolster economic growth and people’s living standards over the long term,” she stressed.

According to the report, global trade growth should rebound to 3.2 per cent in 2024, as global GDP growth picks up to 2.6 per cent.

The 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, the report added.