Russia’s War in Ukraine, China’s COVID-19 Lockdowns ‘Darken’ Outlook for Global Economy, WTO Says

Russia’s war in Ukraine and China’s COVID-19 lockdowns are adding additional risks to the global trade recovery, the World Trade Organization said Monday.

Prospects for the global economy have “darkened” since the outbreak of war in Ukraine in February, prompting the WTO to reassess its projections for world trade over the next two years, the organization said Monday. However, uncertainty about the course of the conflict in Ukraine leaves many questions unanswered.

The most immediate economic impact of the crisis has been a sharp rise in commodity prices, considering Russia and Ukraine are key suppliers of essential goods such as food, energy, and fertilizers. The halt of grain shipments through Black Sea ports in particular could have potentially dire consequences for food security especially in poor countries, the WTO says.

Not only the war, but lockdowns in China to prevent the spread of COVID-19 have further disrupted seaborne trade at a time when supply chain pressures appeared to be easing. This could lead to renewed shortages of manufacturing inputs and higher inflation, the WTO says.

“The war in Ukraine has created immense human suffering, but it has also damaged the global economy at a critical juncture. Its impact will be felt around the world, particularly in low-income countries, where food accounts for a large fraction of household spending,” said WTO Director-General Ngozi Okonjo-Iweala. “Smaller supplies and higher prices for food mean that the world’s poor could be forced to do without.”

Combined with sharp inflationary pressures and growing pressures on the supply chain, the restriction of trade increases risks associated with the economic recovery from the COVID-19 pandemic.

As a result, the WTO has revised its merchandise trade volume growth projections to 3.0% in 2022, down from its previous forecast of 4.7%, and 3.4% in 2023. But the WTO notes that these estimates are less certain than usual due to the fluid nature of the conflict in Ukraine and a lack of hard data on the economic impact from the conflict.

Services trade will also be affected by the conflict in Ukraine, including in the transport sector, which covers container shipping and passenger air transport, the WTO said.

More on this can be found on the WTO website.

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