The global economy has massively shifted since the COVID-19 pandemic. It has yet to recover, and it looks as though a full recovery won’t happen anytime soon, especially with the effects of the war between Russia and Ukraine. Many countries are experiencing financial crises because of this.
The WTO Director-General Ngozi Okonjo-Iweala has stated that the economy is in crisis and that 2023 looks “much bleaker.” As the war in Ukraine continues, disturbances to global trade look set to continue for a long time to come.
Conflict in Europe has seriously affected the global economy and international trade. Its main effect is the increase in the cost of doing business – as well as driving global inflation. It means trade growth has gone up in value – with an increase to $7.7 trillion during the first quarter of 2022 (according to the United Nations Conference on Trade and Development) – however, demand has slowed due to the rising prices.
Growth in trade volume
According to the WTO report, the cost of trading dramatically rose in the first quarter of 2022, particularly in the energy sector. After the war began in Ukraine, fuel prices have soared, making trade energy prices far more expensive around the globe.
The WTO also reported that 2023 would see slower economic growth due to inflation, debt sustainability, and soaring interest rates. There are also issues with supply chains and regionalisation, which have had a significant impact on global prices, contributing to this crisis. The WTO even said there might be a fall from 2.4 to 3% for world trade growth.
Everyone, including families and businesses, will feel these economic difficulties, as it makes energy and food prices much higher than before.
WTO predictions for 2023
The WTO predicts that there will have been an increase of 3.5% in the volume of world trade in 2022 (in comparison to 2021). As well as that, they predict that 2023 will only see 1% of economic growth rather than the previously expected 3.4%. This change occurred due to the enormous, ongoing rise of energy and food worldwide.
This predicted decline would affect economies worldwide, particularly in Europe, the US, and China. Europe will experience higher and higher energy prices, significantly impacting households and businesses. In the United States, it is expected that capital investment and the housing market will be affected. In addition, with China still trying to manage outbreaks of COVID, they will see a continuation of production disruptions.
In developing countries, there may also be issues with debt and food shortages.
What can businesses do about it?
This stunt in economic growth will affect everyone – particularly those looking to do business overseas as international trading is more expensive than ever. At Go Exporting, we support businesses of all sizes to grow into new international markets to either maintain sales or grow profits. Learn more about how we help organisations just like yours to open a world of opportunities through our international trade consultancy services here.