World trade rebounding at a faster clip than expected, WTO says

The World Trade Organization raised its projection for global trade growth in 2021 and 2022 to 10.8% and 4.7%, respectively, citing the resurgence of economic activity in the first half of the year. 

This year’s increase in merchandise trade would mark the biggest year-over-year jump since 2010. In March, the WTO projected that trade would increase by 8% in 2021 and 4% in 2022. 

“Trade has been a critical tool in combating the pandemic, and this strong growth underscores how important trade will be in underpinning the global economic recovery,” WTO Director-General Ngozi Okonjo-Iweala said in a report released on Monday. 

The report warned, however, that uneven access to vaccines could exacerbate economic divergence. 

“The longer vaccine inequity is allowed to persist, the greater the chance that even more dangerous variants of Covid-19 will emerge, setting back the health and economic progress we have made to date,” Okonjo-Iweala said. 

Covid Risk

The WTO said the pandemic continues to present the biggest risk to the recovery in global trade and output. 

To date, more than 4.7 million people worldwide have died from Covid-19 and the number of global infections has passed 233 million, according to the World Health Organization. 

The WTO also warned about the risks of an inflationary spike, which could persuade central banks to taper their expansive monetary policy early. “This could create negative spill-overs, which would eventually hit trade flows,” according to the report. 

The report added that the recent rise in inflation is “probably temporary, driven by supply-side shocks affecting certain sectors in specific economies balanced against the unexpectedly strong recovery in demand.” 

The WTO’s optimistic projections could also be hampered by “longer port delays, higher shipping rates, and extended shortages of semiconductors, with supply side disruptions being exacerbated by the rapid and unexpectedly strong recovery of demand in advanced and many emerging economies.”

Gross domestic product fell 3.8% in 2020 and may expand by 5.3% this year and 4.1% in 2022, the WTO said. GDP growth has been “spurred on by strong monetary and fiscal policy support, and by the resumption of economic activity in countries that have been able to deploy Covid-19 vaccines at scale,” according to the report.