The head of the World Trade Organization warned on Tuesday of a split in the global economy into rival blocs amid the war in Ukraine, urging countries not to restrict trade during the crisis.
“The war in Ukraine caused great human suffering, but it also hurt the global economy at a critical time,” said Ms. Ngozi Okonjo-Iweala at the annual International Trade Outlook presentation.
“History teaches us that dividing the world economy into rival blocs and turning away from the poorest countries does not lead to prosperity or peace,” she said.
With little hard data on the economic impact of the conflict, WTO economists had to rely on modeling to make “reasonable assumptions” about GDP growth in 2022 and 2023.
According to these models, global GDP is expected to grow by 2.8% in 2022 after increasing by 5.7% in 2021.
Influenced mainly by the war in Ukraine, global merchandise trade should grow by 3% in 2022, while the WTO predicted growth of 4.7% in October and 3.4% in 2023, but these figures may be revised depending on the evolution of the conflict.
The WTO clarified that GDP forecasts were already underestimated even before the war in Ukraine.
The “Omicron that continues to expand” option that disrupts the exchange of goods, “inflation that reduces purchasing power, more restrictive fiscal policy and higher interest rates” are all factors that already mattered, said Robert Koopman, chief economist at the WTO.
– “Content in China” –
The February 24 Russian invasion of Ukraine not only created a colossal humanitarian crisis, but also shocked the global economy, already severely destabilized by the Covid-19 pandemic.
Despite their small shares in global trade and manufacturing, Russia and Ukraine are major suppliers of essential commodities such as food, energy and fertilizer, whose supplies are now threatened by war. Grain deliveries through the Black Sea ports have already been halted, which could have catastrophic consequences for the food security of poor countries.
“Declining supply and higher food prices may mean that the world’s poor are forced to do without them. We cannot allow this. Now is not the time to withdraw into oneself,” the WTO head emphasized.
The outbreak of Covid-19 in China also worries the WTO.
“Lockdowns in China designed to prevent the spread of Covid-19 are once again disrupting maritime trade at a time when supply chain pressures seemed to be easing,” which could lead to “new shortages in manufacturing resources and rising inflation.” “According to the organization.
In the first analysis, the WTO has already warned that the conflict in Ukraine could wipe out half of the growth in world trade expected in 2022 or even in the long term, leading to the “breakdown of the world economy into separate blocks”, which will lead to be organized in accordance with geopolitical considerations.
Such a scenario of the so-called “uncoupling” of the economy on a global scale would be, according to the WTO, “very costly”, in particular, for less developed regions.
“Now is not the time to turn inward. In a crisis, more trade is needed to ensure stable and fair access to essentials. Restricting trade will jeopardize the well-being of families and the prosperity of businesses and make it difficult to achieve a sustainable economic recovery after Covid-19,” she said. Ms. Okonjo-Iweala.