The head of the World Trade Organization warned, on Tuesday, of the division of the global economy into rival blocs amid the war in Ukraine, calling on countries not to restrict trade in a time of crisis.
“The war in Ukraine has caused enormous human suffering, but it has also damaged the global economy at a critical time,” said Ms. Ngozi Okonjo-Iweala, on the occasion of the annual presentation of the International Trade Outlook.
“History teaches us that dividing the global economy into competing blocs and turning our backs on the poorest nations leads neither to prosperity nor peace,” she said.
With little solid data on the economic impact of the conflict, WTO economists have had to rely on simulations to make “reasonable assumptions” about GDP growth in 2022 and 2023.
According to these simulations, global GDP is expected to grow by 2.8% in 2022, after rising by 5.7% in 2021. Output growth is expected to reach 3.2% in 2023, assuming geopolitical and economic uncertainty.
Largely under the influence of the war in Ukraine, the volume of world trade in goods should grow by 3% in 2022 – while the WTO expected an increase of 4.7% in October – and 3, 4% in 2023, but these figures could be Revised depending on the evolution of the conflict.
The World Trade Organization made it clear that GDP expectations were already low even before the war in Ukraine.
said Robert Koopman, chief economist at the World Trade Organization.
‘Containment in China’
The Russian invasion of Ukraine on February 24 not only caused a massive humanitarian crisis, but also shook the global economy, which has already been greatly destabilized by the COVID-19 pandemic.
Despite their small shares in global trade and production, Russia and Ukraine are major suppliers of basic products, such as food, energy and fertilizer, whose supplies are now threatened by war. Grain shipments through the Black Sea ports have already been halted, which could have dire consequences for food security in poor countries.
The WTO chief stressed that “low supplies and high food prices could mean that the world’s poor are forced to do without them. We cannot allow that. Now is not the time to turn inward.”
The Covid-19 outbreak in China also worries the World Trade Organization.
“The closures in China, aimed at preventing the spread of Covid-19, are again disrupting maritime trade, at a time when pressures in supply chains appeared to be easing,” which could lead to “a new shortage of manufacturing inputs and higher inflation, according to the organization.
In a preliminary analysis, the World Trade Organization has already warned that the conflict in Ukraine could wipe out half of the growth in global trade projected in 2022, or even in the longer term, leading to “the disintegration of the global economy into separate blocks” which could lead to being regulated according to geopolitical considerations.
The scenario of a so-called “decoupling” of the economy on a global scale would be, according to the WTO, “extremely costly”, especially for the less developed regions.
“Now is not the time to turn inward. In crises, more trade is needed to ensure stable and equitable access to basic necessities. Restricting trade will jeopardize the well-being of families and business prosperity and make it more difficult to achieve,” Ms. Okonjo-Iweala said: