The Russia-Ukraine conflict could substantially weigh down global trade growth to 3% in 2022 from 4.7% projected in October 2021, the World Trade Organization (WTO) said late on Tuesday. Trade growth could rise to 3.4% in 2023 but will still remain way below the 9.8% recorded in 2021, it added. Any such slowdown could also weigh on demand for Indian merchandise at a time when New Delhi is planning to scale up its goods exports from a record $418 billion in FY22.
Similarly, the Ukraine war will likely weigh down global economic growth by 0.7-1.3 percentage points from the earlier forecasts, bringing growth to somewhere between 3.1% and 3.7% in 2022, the global body said. The projections are based on a global economic simulation model and are part of a report, titled The Crisis in Ukraine: Implications of the War for Global Trade and Development.
In the longer term, the WTO said the conflict could even trigger a disintegration of the global economy into separate blocs. India’s real GDP, in such a scenario, would falter by 9% (deviation from a baseline projection), China’s by 7% and Russia’s by as much as 10%, it added.
“In case of a longer-term disintegration of the global economy into two economic blocs (‘decoupling’), global GDP would suffer by about 5% in the long run, with larger losses being incurred by emerging economies,” the WTO said.
Sanctions on Russia, meanwhile, could cause major economies to move towards “decoupling” based on geopolitical considerations, with the aim of achieving greater self-sufficiency in trade and production, the report said. Even if no formal blocs emerge, private players may decide to minimise risk by reorientating supply chains. Of course, the WTO said the simulations “should not be interpreted as forecasts but rather as an attempt to understand the impact the crisis in Ukraine has through different mechanisms”.
Although the share of Russia and Ukraine in total global trade and output are relatively small, these countries are important suppliers of essential products, especially food and energy items.
Both the countries made up 2.5% of world merchandise trade and 1.9% of world GDP in 2021. Yet, they supplied around a quarter of wheat, 15% of barley and 45% of sunflower products exports in 2019, according to the report. The WTO said that some regions like Europe, given its dependence on Russia for energy supply, would be more strongly affected by the war than others.