WTO Chief Calls the Outlook for Global Trade ‘Not Promising’

Negative risks to the global economy are sticking around.

WTO Director-General Ngozi Okonjo-Iweala said the following combination of trade disruptions will continue to cast a pall on the global economic recovery:

• Russia’s war with Ukraine is fueling an escalating crisis in global energy and food markets.
• Bottlenecks continue to plague shipping routes and the line of container vessels waiting outside Germany’s North Sea ports has increased in recent weeks.
• Meanwhile, China’s “Covid Zero” approach to combating pandemic continues to shut down some of the world’s largest cities, ports and manufacturing hubs.
• And this summer, extreme weather events demonstrated the devastating impact that climate change can have on supply chains in many of the world’s largest economies.

“The outlook is not promising,” Okonjo-Iweala told Bloomberg News in an interview on the sidelines of the Africa Adaptation Summit in Rotterdam. “We are in a risky environment. We are still in multiple crises and exogenous shocks.”

Every autumn, WTO economists scrutinize the data driving the most critical sectors of the global economy to determine whether they should revise their annual projections for global trade growth.

Listening to Okonjo-Iweala, it appears likely that the WTO will downgrade its forecast for growth in merchandise trade after slashing it to 3% in April from its previous projection of 4.7%.

China’s Covid Rules

One key variable to watch, she said: whether Chinese policymakers meeting at their Oct. 16 party congress decide to maintain their strict “Covid Zero” policies.

Another bellwether is Russia’s decision to cut off gas exports to European manufacturing powerhouses like Germany, Okonjo-Iweala said.

“At some point you will see factories shutting down in Germany for a period of time because of the lack of access to energy — that is huge. The energy crisis is very worrisome, with respect to trade.”

And finally, the food crisis remains a critical aspect for global growth trends because a shortage in fertilizers will increase pressure on food supplies and intensify the cost-of-living crisis.

“I’m quite worried that this will last for some time and will carry over into next year,” Okonjo-Iweala said. “Why am I saying that? The availability of fertilizer and inputs for the next planting has been a problem, even for major food-producing countries like Brazil and others.”

In sum, the prospects for a global economic rebound remain bleak, and the risks are tilted firmly on the downside.

Source: Bloomberg News

To read the full original article, please go to: https://www.bloomberg.com/news/newsletters/2022-09-06/supply-chain-latest-risks-to-the-outlook-for-global-trade

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