Hard to curb trade growth


gGlobal trade growth is expected to fall from 10.1% in 2021 to 4.3% in 2022, with a further slide to 2.5% in 2023, according to the International Monetary Fund’s latest World Economic Outlook (WEO). .

Although this is noted as higher growth than in 2019 before the pandemic, it is still well below the historical average of 4.6% for 2000-21 and 5.4% for 1970-2021.

The projected declines reflect declines in global output growth, the IMF said, compounded by supply chain constraints and the appreciation of the dollar in 2022. The dollar had risen about 13% in effective terms in September compared to the 2021 average, which will have had an impact on the growth of mainly dollar-denominated trade.

The WEO also notes a widening in global current account balances. Although “not necessarily a negative development”, excessive global imbalances can fuel trade tensions and protectionist measures or increase the risk of disruptive movements of currencies and capital flows, the IMF said.

China is particularly highlighted for its role in the decline in trade growth. “Frequent lockdowns under its zero Covid policy have weighed on the economy, particularly in the second quarter of 2022. Additionally, the real estate sector, which accounts for about a fifth of economic activity in China, is rapidly weakening .

That said, even if the IMF’s pessimistic outlook holds little upside, the outlook could improve if “other factors continue to improve even as challenges in China remain.”

On the decline

The downside risks are more acute. First, the WEO cites the risk that monetary policy miscalculates the right position to reduce inflation. Second, the political trajectories of the largest economies could continue to diverge, leading to further appreciation of the US dollar and cross-border tensions. Third, more shocks to energy and food prices could prolong the duration of inflation. Fourth, the global tightening of financing conditions could trigger widespread over-indebtedness in emerging markets. Fifth, the halt in gas deliveries from Russia could lower production in Europe. Sixth, a resurgence of Covid-19 or new global health alerts could further dampen growth. Seventh, a worsening of the crisis in the Chinese real estate sector could spill over to the domestic banking sector and weigh heavily on the country’s growth, with negative cross-border effects. Finally, geopolitical fragmentation could hamper trade and capital flows, further hampering cooperation on climate policy.

“The balance of risk is heavily tilted to the downside, with around a 25% chance that global one-year growth will fall below 2.0% – in the 10th percentile of global growth outcomes since 1970,” the report said. report.

More generally, the IMF forecasts a slowdown in global economic growth from 6.0% in 2021 to 3.2% in 2022 and 2.7% in 2023, well below average: global economic growth has been an average of 3.6% in 2000-21 and between 1970-2021.

Pierre-Olivier Gourinchas, economic adviser and director of research at the IMF, said: “The slowdown in 2023 will be widespread, with countries representing around a third of the global economy set to contract this year or next. The three largest economies, the United States, China and the Eurozone will continue to stall. Overall, this year’s shocks will reopen economic wounds that were only partially healed after the pandemic.

Low savings in all respects

A total of 143 economies – representing 92% of global GDP – face weaker economies in 2023. In fact, the IMF noted that the forecast for 2023 is the weakest since the 2.5% growth rate seen. during the global downturn of 2001, with the exception of those observed during the global financial crisis and the Covid-19 crisis.

The negative revisions for China, the Eurozone and the United States reflect the tightening of global financial conditions, expectations of a stronger interest rate hike by major central banks to fight inflation, a slowdown more marked in China due to the prolonged closures and the worsening of the housing market crisis, and spill over from the effects of the war in Ukraine.

The IMF noted that while a decline in global GDP or global GDP per capita is not currently in its baseline forecast, a contraction in real GDP lasting at least two consecutive quarters – which the IMF notes some economists call a “ recession” – is expected at some point in 2022-23 in around 43% of economies with quarterly data forecasts – 31 out of 72 economies. This represents more than a third of global GDP.

Moreover, projections for global growth on a fourth quarter over fourth quarter basis point to a “significant weakening”, to just 1.7% in 2022 and 2.7% in 2023, with more pronounced negative revisions for economies. advances than those for emerging markets and developing economies.
Source: The Baltic Exchange, by Carly Fields


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