Wednesday, October 5, 2022

Ukraine Conflict Putting Global Trade Recovery At Risk: WTO

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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.

Shrinking supplies, higher prices

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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.

More trade needed

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.

Ms. 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.

Estimating war’s impact

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.

Low merchandise trade growth

Given the current GDP assumptions, the agency has projected that merchandise trade volume growth this year could be as low as 0.5 per cent or as high as 5.5 per cent. Figures will be updated in October or earlier, if warranted.

World merchandise trade volume grew roughly twice as fast as world GDP in the two decades before the 2007-2008 global financial crisis. The ratio fell to around 1:1 on average in the wake of the crisis.

If the current forecast plays out, it suggests there will be no fundamental change in the relationship between trade and output.

“Risks to the forecast are mixed and difficult to assess objectively,” WTO said. “There is some upside potential if the war in Ukraine ends sooner than expected, but substantial downside risks could emerge if fighting persists for a long time or if the conflict escalates.”

Oil and natural gas

World fuel prices were already rising prior to the war. Last month, the benchmark price for crude oil was $118 per barrel, up 38 per cent from January, and more than 80 per cent year-on-year. Daily prices have moderated recently, from a peak of $128 per barrel on 8 March to $104 on 1 April.

Unlike oil prices, the cost of natural gas has diverged strongly across regions. In Europe – where many countries still rely on Russian supplies – the price rose 45 per cent between January and March, to $41 per million British thermal units (Btu). The price has remained relatively low in the United States, at roughly $4.9 per million Btu.

WTO said higher oil prices may reduce real incomes and import demand worldwide, while higher natural gas prices would probably have a greater impact in Europe.

Effect of sanctions
The trade forecast was released together with annual merchandise and commercial services trade statistics.

The volume of merchandise trade, measured by the average of exports and imports, rose 9.8 per cent in 2021, with the value growing 26 per cent to $22.4 trillion.

Commercial services trade, which includes the transport sector and covers container shipping and the passenger airline industry, was also up 15 per cent in 2021, reaching $5.7 trillion.

Though trade in the travel sector was positive overall, they figures remained weak, as COVID-19 restrictions were only partially eased during the year.

WTO said western sanctions on Russian businesses and individuals are likely to have a strong effect on commercial services.

“Prior to the pandemic, travel/tourism and air transport services were the largest traded services by Russia, accounting for 46 per cent of its exports and 36 per cent of its imports. These services, already hit hard by the pandemic, may be heavily affected by economic sanctions,” the agency said.

Source: UN News

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Editorial Staff
Editorial Staff
Our Editorial Staff at St. Lucia Times is a team publishing news and other articles to over 200,000 regular monthly readers in Saint Lucia and in over 150 other countries worldwide.

3 COMMENTS

  1. “JESUS !” The name says it all !
    In other terms, the only hope and victory that overcomes the world.
    With the first humain beings :
    👨‍🦱Adam and 👱 Eve.
    Adam and Eve decide to go their own stubborn way and seek their own wisdom. They listen to to the deceptive voice of God’s enemy 🐍, satan and (doubt God’s trustworthiness.
    As a result of rébellion, however,sadly and inspite of God’s repeated warnings and pleading (Jesus) ,we are determine to go our own stubborn way,listen to the false gods of the nations that surrounds us and bring the Judgement of God upon ourselves.

  2. We should all stand and applaud “Truth Be Told” for his diatribe of lies; a modern example which proves the 19th century quip:

    “If you want truth to go round the world you must hire an express train to pull it; but if you want a lie to go round the world, it will fly; it is as light as a feather, and a breath will carry it.”

    Russia went into Ukraine on a special operation to stop the Nazis in Ukraine from accelerating the genocide against Russian-speaking Ukrainians, who had only expressed their democratic right to resist the US-led coup of 2014, that had unseated the government they had democratically elected.

    There is nothing in this article to support the premise that the Russian invasion of Ukraine caused economic woe for the rest of the globe. I see lots of references to Russian sanctions, but Russia has not sanctioned anyone. Truth be told, they should actually be called US & European sanctions; and Russia has yet to respond to them – they might never have to.

    The only thing Russia is guilty of is in adhering to the rule that you should “never interfere with an enemy while he’s in the process of destroying himself.”

  3. It is noble to keep hope alive. Still, notwithstanding the positive outlook we ought to have in the midst of the current darkness, we should also consider that we might just be witnessing the beginning of unprecedented sorrows in every corner of the world! After all, an evil and unrelenting Kremlin regime — under the sway of Hitler II, aka Putin, and who himself appears swayed by the same spirits that controlled Adolf Hitler over 70 years ago — could very well crush the hopes of a humanity that is hoping that this is just a passing storm! While we can hope that “this too shall pass”, and that we will soon get back to a healthy and flourishing world that bustles with an abundance of trade and commerce, the opposite is equally likely! The countless hideous acts of evil perpetrated by the Russian army (aspects of which have already surfaced in the abandoned communities around Kiev), hand in hand with Putin’s heartlessness and narcissistic commitment to destroy and conquer the nation of Ukraine, which he has already declared has no right to exist as an independent nation, might very well be the beginning of the darkest days mankind has ever known. It is no secret that Putin has set his sights on restoring every inch of the former Soviet Union! Will a cruel, misguided Putin relent and back down from his megalomaniac quest for personal glory? Will he have a change of heart, give up his mad quest, and face the International Court of Justice in the Hague, in the Netherlands, where he will answer for his war crimes and genocide? Or will he dig in his heels and do whatever his power-swayed mind tells him to do in a desperate bid to save face and also save his own skin? Putin appears to be the type of character who would sooner take down everybody with him if he senses that he will go down in shame and humiliation! He has already hinted that he is prepared to resort to Nuclear war if he feels cornered as he pursues his mad ambition! And the deceived, evil-hearted people around him — who swim daily in their self-imposed cesspool of lies — may not be seeing or thinking with enough clarity to stop the mad emperor from selfishly setting off the doomsday missiles — if push comes to shove! Seems the world has little choice but to accept the truth that the hope for humanity is emblazoned in the message of the season in which we are currently immersed: Jesus Christ, who literally lived among us as God in the flesh 2,000 years ago, and who gave up his life for all, is the only hope for mankind and the future of the world! Yes, I’ve said it! It is the truth — and I’m sticking to it! Don’t let the message of the season escape your heart.

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