Global trade will fall this year amid slower growth and Red Sea turmoil, WTO official says
Reuters
- Chief WTO Economist Ralph Ossa said on Monday the group's previous global trade growth estimates were "overly optimistic."
- Concerns are fueled by Yemen-based Houthi militants attacking commercial ships in the Red Sea.
- Despite the chaos, Ossa said he still has faith in the resilience of the international trade and global economy.
The World Trade Organization is likely to slash 2023 and 2024 trade projections due amid weaker-than-expected global economic activity and disruptive attacks by Houthi militants in the Red Sea.
The WTO previously projected a rise of 0.8% in merchandise trade volumes for 2023 and a 3.3% increase for 2024.
But now, escalating tensions in the Red Sea as a result of Iran-backed Houthis' attacks on commercial ships have heightened the WTO's concerns, with chief economist Ralph Ossa telling Reuters on Monday the group's previous forecasts seem "overly optimistic."
Ossa said the WTO would publish updated forecasts in the coming months, and various global organizations have trimmed their GDP growth forecasts this year, impacting the WTO's trade predictions. He also emphasized a growing uptick in consumer prices due to surging shipping costs since the Houthi attacks began.
As Houthi militias continue to target commercial vessels in the Red Sea with drone and missile attacks, companies shipping everything from energy resources like oil, energy, and natural gas, to commodities such as coffee, have experienced disruptions in their supply chains. Numerous big shipping companies are choosing to reroute or cancel shipments through the region.
Military responses from US and UK air and naval forces have successfully fended off some attacks but haven't halted them. President Joe Biden has acknowledged that the strikes are unlikely to entirely prevent the Houthis from targeting shipping lanes.
Experts have said the turmoil around the Suez Canal, along with steady economic growth, could spark a renewed bout of inflation this year.
Houthi Military Media/Handout
Still, the WTO's Ossa also highlighted that goods trade for this year is poised to surpass 2023, adding that the global economy and world trade remain robust despite recent geopolitical issues and fears of slower growth. If disruptions persist, inflation concerns in Europe are anticipated to stick around but are unlikely to result in a massive economic shock akin to the COVID-19 era.
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