Global Trade Outlook highlights food security risks

19 April 20233 min reading

The World Trade Organization's Global Trade Outlook, released on 5 April, highlights food security risks as being among factors that could affect new projections for trade growth in 2023 and 2024.

Global trade growth in 2023 is still expected to be subpar despite a slight upgrade to GDP projections since last fall, WTO economists said in a new forecast on 5 April. Weighed down by the effects of the war in Ukraine, stubbornly high inflation, tighter monetary policy and financial market uncertainty, the volume of world merchandise trade is expected to grow by 1.7% this year, following 2.7% growth in 2022, a smaller-than-expected increase that was pulled down by a sharp slump in the fourth quarter.

Looking ahead to 2024, trade growth should rebound to 3.2%, as GDP picks up to 2.6%, but this estimate is more uncertain than usual due to the presence of substantial downside risks, including geopolitical tensions, food supply shocks, and the possibility of unforeseen fallout from monetary tightening.

WTO Chief Economist Ralph Ossa said: “The lingering effects of COVID-19 and the rising geopolitical tensions were the main factors impacting trade and output in 2022 and this is likely to be the case in 2023 as well. Interest rate hikes in advanced economies have also revealed weaknesses in banking systems that could lead to wider financial instability if left unchecked. Governments and regulators need to be alert to these and other financial risks in the coming months.”

The dollar value of trade in agricultural products rose 11 percent in 2022, the report also finds. It notes that food prices during the year were high and volatile, while fertilizers prices rose by 63 percent year-on-year.

Global food supplies are less precarious than many had feared at the start of the war in Ukraine, but they remain a cause for concern, the report says. The average price of wheat rose 44% year-on-year during this period while the value of traded wheat increased by 31%. This implies a decline of around 7.5% in the volume of world wheat trade. This may not have disastrous consequences if consumers in all countries – including the poorest – are able to import sufficient quantities of wheat or some close substitute. “However, there is little margin for error if a major producer suffers a crop failure or climate-related natural disaster. Such an event could precipitate a more serious food crisis, which would require an increase in trade,” WTO warns. Fortunately, countries appear to have accessed alternative sources of supply so far. For example, between January and October of last year, Ethiopia’s imports of wheat from Russia and Ukraine fell 75% and 99.9% respectively but this was compensated by increased shipments from the United States and Argentina.

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