War in Ukraine could halve 2022 global trade growth: WTO

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Volunteer steer a trolley with boxes in a warehouse storing clothes and food donated for evacuees in the western Ukrainian city of Lviv on April 11, 2022. (Photo by Yuriy Dyachyshyn / AFP)

 

by Robin MILLARD
Agence France Presse

GENEVA, Switzerland (AFP) — Russia’s war in Ukraine could almost halve world trade growth this year and drag down global GDP growth too, the World Trade Organization projected Monday.

The WTO said that the Russian invasion had not only created a humanitarian crisis of “immense proportions” but had also dealt a “severe blow” to the global economy.

It also said that in the longer term, the conflict could even spark a disintegration of the global economy into separate blocs.

The Geneva-based global trade body issued its first analysis of the impact of the war ahead of its annual world trade forecast report on Tuesday.

A woman walks past the closed Uniqlo shop at a shopping mall in Moscow on April 11, 2022. – On February 24 Russia started military action in Ukraine triggering unprecedented Western sanctions against Moscow and sparking an exodus of foreign corporations including H&M, Zara, Uniqlo, McDonald’s and Ikea. (Photo by Kirill KUDRYAVTSEV / AFP)

It said that while the shares of Russia and Ukraine in overall world trade and output are relatively small, they are important suppliers of essential products, notably food and energy.

“Using a global economic simulation model, the secretariat projects that the crisis could lower global GDP growth by 0.7 to 1.3 percentage points, bringing growth to somewhere between 3.1 percent and 3.7 percent for 2022,” the WTO said.

“The model also projects that global trade growth this year could be cut almost in half from the 4.7 percent the WTO forecasted last October to between 2.4 percent and three percent.”

– Europe, Africa, Middle East impact –
Russia invaded Ukraine on February 24 and the war is grinding toward its seventh week.

The WTO said that some regions would be more strongly affected by the war than others.

Europe is the main destination for both Russian and Ukrainian exports and therefore is likely to experience the heaviest economic impact, the organisation said.

Reduced shipments of grains and other foodstuffs will boost the prices of agricultural goods, with negative consequences for food security in poorer regions, it added.

A truck is loaded with wheat at Bogatoye village in Izmail on March 24, 2022. – The fate of the war in Ukraine is currently being played out in the east of the country, but the food security of tens of millions of people around the world depends on the sowing which is beginning in the west and south, relatively sheltered from the fights. (Photo by BULENT KILIC / AFP)

Africa and the Middle East are the most vulnerable, as they import more than 50 percent of their cereal needs from Ukraine and/or Russia.

The WTO said some sub-Saharan countries were facing the possibility of price hikes of up to 50 to 85 percent for wheat due to the war’s impact on grain shipments.

“The brunt of the suffering and destruction are being felt by the people of Ukraine themselves but the costs, in terms of reduced trade and output, are likely to be felt by people around the world through higher food and energy prices and reduced availability of goods exported by Russia and Ukraine,” the WTO study said.

“Poorer countries are at high risk from the war, since they tend to spend a larger fraction of their incomes on food compared to richer countries.

“This could impact political stability.”

Poor Yemeni families receive flour rations and other basic food supplies from charities in the province of Lahj, in southern Yemen, on March 29, 2022, as food prices have doubled since last year and the fact that Ukraine supplies nearly a third of Yemen’s wheat imports has heightened fears of a deepening famine. – The disruption in export flows resulting from Russia’s invasion and international sanctions has spurred fears of a global hunger crisis, especially across the Middle East and Africa, where the knock-on effects are already playing out. The toll is most evident in conflict zones such as Yemen, the Arab world’s poorest, where a devastating war since 2014 has sparked one of the world’s worst humanitarian crises. (Photo by Saleh Al-OBEIDI / AFP)

– International trade ‘decoupling’ –
The WTO said one longer-term risk from the war is that it could trigger a disintegration of the global economy into separate blocs.

It said sanctions could cause major economies to move toward “decoupling” based on geopolitical considerations, with the goal of achieving greater self-sufficiency in production and trade.

Even if no formal blocs emerge, private actors might decide to minimise risk by reorientating supply chains.

The WTO warned that the income losses from such a development “would be severe, especially for emerging and developing economies”.

“At a global level, it could reduce GDP in the long run by about five percent, notably by restricting competition and stifling innovation,” it said, cautioning that the GDP decline could be even more severe.

 

© Agence France-Presse