Global trade to slow down in 2022 and 2023: WTO

Global trade is likely to slow down in the closing months of 2022 and into 2023, according to the latest report by the World Trade Organisation (WTO) Goods Trade Barometer. The WTO has cited global macroeconomic situations such as the Russia-Ukraine crisis, soaring energy prices, inflation, and monetary tightening in major economies to be among the key reasons for the slowdown. 

The Goods Trade Barometer is a composite leading indicator for world trade, providing real-time information on the trajectory of merchandise trade relative to recent trends. Values greater than 100 signal above-trend expansion while values less than 100 indicate below-trend growth. The current barometer reading stands at 96.2, which is below both the baseline value for the index and the previous reading of 100, thus reflecting a cooling demand for traded goods.

Notably, the WTO in October predicted the merchandise trade volume to grow at 3.5% in 2022 and 1.0% in 2023, due to global macroeconomic trends. The merchandise trade witnessed a marginal surge of 4.7% year-on-year in the second quarter of this year. Marginal trade stood at 4.8% in the first quarter of this year. The WTO expects the trade growth to average around 2.4% year-on-year (YoY) in the second half of 2022. 

“The barometer index was weighed down by negative readings in sub-indices representing export orders (91.7), air freight (93.3) and electronic components (91.0). Together, these suggest cooling business sentiment and weaker global import demand. The container shipping (99.3) and raw materials (97.6) indices finished only slightly below trend but have lost momentum,” WTO said in a statement.

“The main exception is the automotive products index (103.8), which rose above trend due to stronger vehicle sales in the United States and increased exports from Japan as supply conditions improved and as the yen continued to depreciate,” it added. 

Notably, earlier this month, the International Monetary Fund (IMF) also lowered the global growth forecast to 2.7% for the next year owing to a unique mix of headwinds including the Russia’s invasion of Ukraine, interest rate hike to contain inflation, and lingering pandemic effects such as China’s lockdowns and disruptions in supply chains.

“The challenges that the global economy is facing are immense and weakening economic indicators point to further challenges ahead. However, with careful policy action and joint multilateral efforts, the world can move toward stronger and more inclusive growth,” IMF said in its report. 

Meanwhile in India, exports witnessed the sharpest decline in two years, to 15.9% at $29.78 billion in October from $35.45 billion in September. The country’s trade deficit also widened by 4.66% to $26.91 billion in October from $25.71 billion in September this year and 50.25% as against $19.9 billion in October last year.

According to a report by S&P Global, the country’s trade balance for the first nine months of 2022 witnessed a decline of 3.6% of the country’s GDP. “In India, the decrease in foreign reserves of $73 billion through August was far and above losses attributable to valuation changes (of $30 billion),” it said.