World trade and output growth are continuing the downward trend that started in 2022, with feeble growth in early 2023, as the fallout from the war in Ukraine continues to push commodity prices and inflation higher and several big economies continue their monetary policy tightening cycles, according to the World Trade Organization’s World Trade statistical report (pdf).

REMEMBER- The World Trade Organization expects (pdf) global trade growth to slow in 2023 to just 1% — down from 3.5% in 2022 — as a result of supply chain disruptions brought on by covid-19 and the Russia-Ukraine war.

Merchandise trade export volumes fell nearly everywhere — including in MENA…: North America was the sole region to see a 0.7% increase in merchandise volumes between 3Q 2022 and 1Q 2023, while the MENA region saw volumes fall 2.8% y-o-y, Europe’s fell 1.5% y-o-y, Asia’s by 1.9% y-o-y and South America’s dropped 2.6% y-o-y. This comes after a strong year for the Middle East’s merchandise trade, which grew in terms of value by 31% y-o-y — more than any other region — in 2022, on the back of high global commodity prices.

…and continued to dip in 1Q 2023: World merchandise trade deceleration peaked with a 2.1% drop in 4Q 2022, and experienced a further 0.3% decline in 1Q 2023, on the back of growing energy prices and interest rates resulting in bearish consumption and investment patterns, which the WTO expects to persist through FY 2023.

The Middle East’s total exports saw a 7% y-o-y decline in 1Q 2023, in line with a global trend that saw exports fall across the world, including in South America, Asia, Africa and the Commonwealth of Independent States (CIS).

They’re expected to fall further for the rest of the year: Merchandise trade volumes in 1Q 2023 were down 1% y-o-y, which indicates a need for trade to rise significantly in order to meet WTO’s forecast of 1.7% growth for 2023.

Imports, on the other hand, have been rising in the MENA region — which goes against the general trend: Import volumes between 3Q 2022 and 1Q 2023 have been on the decline across the world, though they saw a 0.8% increase in the Middle East. Imports were up compared to 2019 levels, though, in all regions except Africa, according to the report.

The Middle East’s imports rose 10% y-o-y in 1Q 2023, according to the report, mostly driven by higher oil and gas prices spurring a surge in domestic revenues.

USD appreciation drove the sluggish growth in 2022, but there’s hope the trend eases: The strengthening of the USD in 2022 —- which mostly came off the back of increased US interest rates — subdued world trade volume and value growth as developing countries struggled with inflationary pressures and higher debt service and import costs. The USD peaked against a broad basket of currencies some 12.7% y-o-y in October of last year. Between then and May 2023, the USD depreciated 5.9% in value in terms of other currencies, which could help ease global monetary conditions.

That’s also why emerging economies are looking at de-dollarization: Several countries in the Middle East and beyond have been exploring prospects of non-USD trade. The UAE and India agreed to boost bilateral trade while promoting the use of their own domestic currencies under two MoUs signed between the Central Bank Of The UAE (CBUAE) and the Reserve Bank Of India (RBI), with India settling its first crude oil payment from the UAE in INR earlier in August. Other countries such as Egypt, the UAE, Saudi Arabia and Iran are officially joining the Brics alliance, which is also currently focused on shifting trade to alternative currencies.

Continued challenges ahead: Trade and GDP for the remaining part of the year is expected to be drawn back by increased international conflicts, food, energy and financial instability and high foreign debt levels, the report said.

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