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WTO fears global trade growth will drop by 50% because of Russia-Ukraine conflict

The WTO is worried that global trade growth will decrease by 50% because of the Russia-Ukraine conflict - Photo 1.

Russian soldiers patrol on a street in Volnovakha in the Donetsk region, eastern Ukraine on April 11, Photo: AFP

In the first analysis of the effects of stress Russia – Ukraine was released by the WTO Secretariat ahead of the release of its forecast for global world trade, which the organization said the conflict has “dealt a severe blow” to the global economy.

Based on a global economic simulation model, the WTO forecasts that Russia-Ukraine tensions could reduce GDP growth by 0.7% – 1.3% to 3.1% – 3.75% in 2022. The organization also forecast that this year’s global trade growth could fall by nearly 50% from last October’s 4.7% forecast to 2.4-3%.

The WTO Secretariat also said the conflict has pushed up food and energy prices and reduced the ability of Russia and Ukraine to supply exports.

Both Russia and Ukraine are important suppliers of essential products, especially food and energy. The two countries supplied about 25% of wheat, 15% of barley and 45% of sunflower products for global exports in 2019. Russia alone accounted for 9.4% of world fuel trade, including 20% ​​of the market. natural gas exports.

The WTO highlights Russia as one of the global suppliers of palladium and rhodium, which are important elements in the production of catalytic converters for cars.

Meanwhile, semiconductor production is significantly dependent on neon gas supplied by Ukraine. Disruptions to the supply of these materials could affect automakers at a time when the industry is recovering from semiconductor shortages.

According to the analysis, Europe, the main destination of both exports from Russia and Ukraine, is likely to suffer an economic impact. Disruptions in the transportation of grain and other food shipments will also increase agricultural prices.

Africa and the Middle East are the most vulnerable regions, as these two regions import more than 50% of their grain needs from Ukraine and/or Russia. A total of 35 countries in Africa import food and 22 countries import fertilizers from Ukraine, Russia or from both countries.

Meanwhile, several countries in sub-Saharan Africa are also facing the risk of wheat prices rising as high as 50-85% due to the impact of the crisis on grain shipments.

As a result, the WTO warns that the current crisis has the potential to exacerbate international food insecurity at a time when food prices are already at historic highs due to the COVID-19 pandemic and other factors. other.

In the long term, the WTO warns that the Russia-Ukraine conflict could even spark the disintegration of the global economy into separate blocs.

Sanctions could drive major economies toward “decoupling” based on geopolitical considerations, with the goal of achieving greater self-sufficiency in production and trade.

Private organizations may also decide to reduce risk by reorienting the supply chain.

The WTO warned that the damage to income from such development “will be severe, especially for emerging and developing economies”.

At the global level, this trend could reduce GDP by about 5% in the long term through restricting competition and stifling innovation, leading to a more serious decline in GDP.

Hot Ukrainian Eastern Front Hot Ukrainian Eastern Front

TTO – The Donbass region consisting of two self-proclaimed republics Donetsk and Lugansk is becoming a new front, with fierce fighting forecast as Russia is sending more troops to the region after withdrawing from northern Ukraine.

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