Prospects for the global economy have darkened since the outbreak of war in Ukraine on 24 February 2022, prompting World Trade Organisation (WTO) Economists to reassess their projections for world trade over the next two years; the organization now expects merchandise trade volume growth of 3.0% in 2022 — down from its previous forecast of 4.7% — and 3.4% in 2023, but these estimates are less certain than usual due to the fluid nature of the conflict. The most immediate economic impact of the crisis has been a sharp rise in commodity prices. Despite their small shares in world trade and output, Russia and Ukraine are key suppliers of essential goods including food, energy, and fertilizers, supplies of which are now threatened by the war. Grain shipments through Black Sea ports have already been halted, with potentially dire consequences for food security in poor countries. The war is not the only factor weighing on world trade at the moment. Lockdowns in China to prevent the spread of COVID-19 are again disrupting seaborne trade at a time when supply chain pressures appeared to be easing. This could lead to renewed shortages of manufacturing inputs and higher inflation.

Main Points:

• World merchandise trade volume is expected to grow 3.0% in 2022 (down from 4.7% previously) and 3.4% in 2023, but these figures may be subject to revision due to uncertainty about the course of the conflict in Ukraine.
• World GDP at market exchange rates is expected to increase by 2.8% in 2022 after rising 5.7% in 2021. Output growth should pick up to 3.2% in 2023, assuming persistent geopolitical and economic uncertainty.
• The CIS region should see a 12.0% decline in imports and a 7.9% drop in GDP in 2022, but exports should grow by 4.9% as other countries continue to rely on Russian energy. Regional disparities may narrow due to weak import demand in Europe and Asia.
• The volume of merchandise trade rose 9.8% in 2021. The US$ value of this trade grew 26% to US$ 22.4 trillion. The value of commercial services trade was also up 15% in 2021 to US$ 5.7 trillion.
• Services trade will also be affected by the conflict in Ukraine, including in the transport sector, which covers container shipping and passenger air transport.

Chart: Merchandise exports and imports by region, 2019Q1-2023Q4

Volume index, 2019=100

a             Refers to South and Central America and the Caribbean.
b             Refers to the Commonwealth of Independent States, including certain associate and former member.
Source:   WTO and UNCTAD.

Table 1 summarizes annual merchandise trade volume growth since 2018 and projections for 2022 and 2023. Annual volume indices sometimes differ slightly from the quarterly indices due to differences in methodology, but they generally tell the same story. In addition to the standard WTO regions, the table also includes experimental forecasts for Least-Developed Countries (LDCs).

The year 2021 saw a sharp rebound in trade volumes after the pandemic-induced slump of 2020, but growth might have been stronger without recurring waves of COVID-19 during the year. Every region had export growth below the world average of 9.8% except for Asia, which saw its exports increase by 13.8%. The situation was reversed on the import side, where North America, South America, the CIS and Asia all recorded above average growth.

The forecast foresees 2022 export volume growth of 3.4% in North America, -0.3% in South America, 2.9% in Europe, 4.9% in the CIS, 1.4% in Africa, 11.0% in the Middle East, and 2.0% for Asia. It also anticipates import growth of 3.9% in North America, 4.8% in South America, 3.7% in Europe, -12.0% in the CIS, 2.5% in Africa, 11.7% in the Middle East and 2.0% in Asia. LDCs should see their export and import volumes increase by 3.5% and 6.6% respectively in 2022. Except for the Middle East, all regions saw forecasts for 2023 revised downward. Trade costs should rise in the short run as a result of sanctions, export restrictions, energy costs and disruptions in transport due to COVID-19.

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