The WTO has slashed its projection for world trade growth in 2023 by half to 0.8 per cent from its earlier estimate of 1.7 per cent in April this year as the “abrupt” slowdown in world output and trade in the fourth quarter of the last year spilled over into the current year.

“World trade and output slowed abruptly in the fourth quarter of 2022 as the effects of persistent inflation and tighter monetary policy were felt in the US, the EU and elsewhere, and as strained property markets in China prevented a stronger post Covid-19 recovery from taking root,” said the WTO’s Global Trade Outlook and Statistics Update for October 2023 put out on Thursday.

The continued disruption caused by Russia’s war in Ukraine has added to the uncertainty and together these developments have cast a shadow over the outlook for trade, the report added. World trade has steadily come down from the 2.7 per cent growth posted in 2022.

On the positive side, the 3.3 per cent growth in world trade projected for 2024 remains nearly unchanged from the previous estimate.

Challenge for exporters

The lower trade projection for the current year poses a challenge for Indian exporters who have been hoping for a bounce back in the Christmas and New Year season after seven months of continuous decline in shipments (year-on-year) since February 2023. However, the 2024 growth projection still holds out promise.

In the first five months of the current fiscal, India’s exports contracted by 11.9 per cent to $172.95 billion while imports declined by 12 per cent to $ 271.83 billion.

In global trade, the most notable development is weakening import demand in manufacturing economies, according to WTO Chief Economist Ralph Ossa. “Import volumes in 2023 are expected to contract between 0.4 per cent and 1.2 per cent in North America, South America, Europe, and Asia. Meanwhile, imports appear set to rise sharply in regions that export energy products disproportionately, as a result of increased revenues flowing from higher commodity prices,” Ossa said.

Trade volumes

On the export side, trade volumes in Europe and Asia are projected to grow just 0.4 per cent and 0.6 per cent, respectively, whereas North America could see stronger increase of 3.6 per cent this year.

Things are, however, set to improve for Asian economies in 2024 as Asia is expected to be the fastest growing region on both the export and import sides.

“This growth (in 2024) should be driven by increased trade in goods closely linked to the business cycle such as machinery and consumer durables, which tend to rebound when economic growth stabilises,” said Ossa.