The World Trade Organization (WTO) predicts that global trade growth will be cut in half this year.

According to Reuters on the 5th (local time), the WTO cut its forecast for global trade growth in goods by half this year, citing persistent inflation, rising interest rates, tensions in China’s real estate market, and the war in Ukraine casting a shadow on the outlook.

The WTO lowered its forecast for global trade in goods to increase by 0.8% this year, which is only half of the April forecast (1.7%).

Goods trade growth is expected to recover to 3.3% next year, little change from the April forecast (3.2%).

According to the WTO, the slowdown in trade across a wide range of countries is notable for goods, particularly steel, office and communications equipment, and textiles and clothing. However, automobile sales are expected to grow exceptionally this year with a surge in sales.

The WTO assessed that the outlook risks were balanced. The WTO explained that although China’s sharper-than-expected economic slowdown and inflation rising again, keeping interest rates in place longer are potentially negative factors, the outlook could be raised if inflation eases quickly.

The 164-member WTO reiterated its previous position that it had seen some signs of global tensions and trade fragmentation but had found no evidence of widespread deglobalization that could threaten its 2024 outlook.

However, the possibility of deglobalization cannot be completely ruled out. One sign is that the share of intermediate goods in world trade, an indicator of global supply chain activity, recorded 48.5% in the first half of 2023, down from an average of 51.0% over the past three years, the WTO noted.

It is not clear whether the decline is due to geopolitical tensions or the overall economic downturn, the WTO said.

Although goods continue to be produced through complex supply chains, the data suggests that the scope of these supply chains may have peaked, the WTO explained.

WTO Director-General Ngozi Okonjo-Iweala said the trade slowdown was a cause for concern because it could reduce living standards, especially for people in poor countries.

He expressed concern that “global economic fragmentation will only make the problem worse.”

International tourism growth is moderating after a strong rebound last year, the WTO said. Global trade in commercial services rose 9 percent in the first quarter of 2023, compared with a 19 percent decline in the second quarter of 2022, the WTO added.

Source: Donga