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The World Trade Organisation has revised its growth forecast for global merchandise trade in 2023, attributing the change to ongoing inflation, elevated interest rates, instability in the Chinese property market, and the Ukraine conflict. Announced on Thursday, the Geneva-based organisation now expects a modest 0.8% increase in trade volumes for the year, a significant reduction from its April prediction of 1.7%.

For the year 2024, the organisation anticipates that goods trade will experience a growth of 3.3%, a figure nearly identical to its April forecast of 3.2%.

The 164-member body reiterated its earlier warning, stating it has observed some indications of trade fragmentation due to global tensions. However, it found no evidence of a more extensive de-globalisation that could impact its 2024 forecast.

One key observation was the decrease in the share of intermediate goods in global trade, an important indicator of global supply chain activity. This share fell to 48.5% in the first half of 2023, compared to an average of 51.0% over the prior three years.

The WTO expressed uncertainty over whether this decline was a result of geopolitical tensions or a broader economic slowdown.

“The data suggest that goods continue to be produced through complex supply chains, but that the extent of these chains may have reached their high-water mark,” the WTO said.

WTO Director-General Ngozi Okonjo-Iweala said, “The expected slowdown of trade was a cause for concern because it could depress the living standards of people around the world, particularly in poor countries.”

“Global economic fragmentation would only make these challenges worse,” she said.

Although the WTO’s forecast does not include services, it indicated that the sector is experiencing a slowdown after a strong recovery in international tourism in 2022. Global commercial services trade grew by 9% in the first quarter of 2023, down from a 19% increase in the second quarter of 2022, the WTO said.