The war in Ukraine has created immense human suffering but it is also putting the fragile recovery of global trade at risk, and the impact will be felt across the planet, the World Trade Organization (WTO) said on Tuesday.
World merchandise trade volume is expected to grow just 3 per cent this year, down from the previous forecast of 4.7 per cent, and 3.4 per cent in 2023, though these figures could be revised given the uncertainty surrounding the conflict.
The Russian invasion began on 24 February and WTO said the most immediate impact of the war has been a sharp rise in commodity prices.
Both Russia and Ukraine are key suppliers of essential goods such as food, energy, and fertilizers, supplies of which are now threatened.
Grain shipments through Black Sea ports have also been halted, with possible dire consequences, particularly for poorer countries.
“Smaller supplies and higher prices for food mean that the world’s poor could be forced to do without. This must not be allowed to happen,” said Ngozi Okonjo-Iweala, the WTO Director-General.
The war is taking place as other factors impact global trade, including the latest COVID-19 lockdowns in China which are again disrupting maritime trade just as supply chain pressures appeared to be easing.
Ngozi Okonjo-Iweala urged governments to work with multilateral organizations like WTO to facilitate trade.
“In a crisis, more trade is needed to ensure stable, equitable access to necessities. Restricting trade will threaten the wellbeing of families and businesses and make more fraught the task of building a durable economic recovery from COVID‑19,” she said.
Given the scant data on the economic impact of the conflict, WTO economists have had to rely on simulations for their assumptions about global Gross Domestic Product (GDP) growth through 2023.
Their estimates capture the direct impact of the war, including destruction of infrastructure and increased trade costs; the impact of Russian sanctions, including blocking Russian banks from the SWIFT international banking payments system; and reduced aggregate demand in the rest of the world – in part due to rising uncertainty.
WTO said world GDP at market exchange rates should increase by 2.8 per cent this year, or 1.3 percentage points down from the previous forecast.
Output growth should rise to 3.2 per cent in 2023, “assuming persistent geopolitical and economic uncertainty”, which is close to the 3.0 per cent average rate for the period 2010-2019.
In the Commonwealth of Independent States (CIS) region — created after the dissolution of the Soviet Union in 1991, and which excludes Ukraine — GDP is expected to drop 7.9 per cent, leading to a 12 per cent decline in imports.
However, exports should increase by nearly five per cent as other countries continue to rely on Russian energy.
“If the situation were to change, we might see stronger export volume growth in other fuel producing regions,” said WTO.