The head of the World Trade Organization (WTO) warned on Tuesday of the risk of a division of the global economy into rival blocs in the context of the war in Ukraine, and urged countries not to restrict trade in this period of crisis.
“The war in Ukraine has caused immense human suffering, but it has also hurt the world economy at a critical time,” Director-General Ngozi Okonjo-Iweal said at the annual presentation of international trade projections.
” History teaches us that dividing the world economy into rival blocs and turning our backs on the poorest countries does not lead to prosperity or peace. The WTO can play a critical role by providing a forum where countries can discuss their differences without resorting to force,” he added.
With little solid data on the economic impact of the conflict, WTO economists had to resort to simulations to make reasonable assumptions about GDP growth in 2022 and 2023.
According to them, world GDP is projected to increase by 2.8% in 2022, after rising 5.7% in 2021. Growth would pick up to 3.2% in 2023.
The volume of world merchandise trade would increase 3% in 2022 - while the WTO expected a 4.7% increase in October - and 3.4% in 2023, but these figures could be revised following uncertainty about the evolution of the conflict in Ukraine.
The war in that former Soviet republic not only created a far-reaching humanitarian crisis, but also greatly affected the world economy, already destabilized by the covid-19 pandemic.
Since the start of the Russian invasion on February 24, tons of grain have been paralyzed in Ukrainian ports such as Mariupol, a city bombed and besieged by Moscow because of its strategic position.
Lockdowns in China
Although they do not have large shares in trade and production globally, Russia and Ukraine are important suppliers of essential products, including food, energy and fertilizer. Grain shipments from Black Sea ports have stopped, which could have devastating consequences for food security in poor countries.
“As a result of the reduction in food supplies and the rise in food prices, the world's poor could be forced to do without them,” stressed the head of the WTO.
War is not the only factor affecting world trade today.
According to the WTO, “lockdowns imposed in China to prevent the spread of covid-19 are again disrupting maritime trade at a time when supply chain pressures seemed to be easing,” which could “lead to a new shortage of manufacturing inputs and increased inflation.”
In a first analysis, the WTO warned that the war in Ukraine could halve the world growth expected by 2022, and lead in the long term to a “disintegration of the world economy into different blocs” that would be organized according to geopolitical considerations.
This scenario would be “very costly”, according to the WTO, particularly for the less developed regions.
“That should not be allowed to happen. This is not the time to shut ourselves up. In a crisis, more trade is needed to ensure stable and equitable access to basic necessities. The restriction of trade will threaten the welfare of families and businesses and make it difficult to forge a lasting economic recovery from covid-19,” the official concluded.
(with information from AFP)
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