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GENEVA —The World Trade Organization reports the war in Ukraine has dealt a severe blow to the global economy, shattering expectations of a recovery from the damaging impact of the COVID-19 pandemic on world trade and business confidence.
WTO economists have downgraded their forecast for world trade over the next two years. They now expect world merchandise trade to grow by 3 percent this year and pick up slightly to 3.2 percent in 2023. This is down from the previous 4.7 percent projection.
They say these figures are likely to be revised again given the uncertainty from the fallout of the war in Ukraine. WTO Director-General Ngozi Okonjo-Iweala says the economic reverberations of this conflict extend far beyond Ukraine's borders.
"It is now clear that the double whammy of the pandemic and the war have disrupted supply chains, increased inflationary pressures, and lowered expectations for output and trade growth," she said. "These events and the enormous uncertainty they have created make for a complex forecasting environment."
The WTO finds the most immediate economic impact of the war has been a sharp rise in the price of food, energy, fertilizer and some important minerals.
Russia and Ukraine are key suppliers of these commodities in the world market, Okonjo-Iweala notes, adding that a potential food crisis is looming. She says poor countries are likely to suffer most from high food prices because they tend to spend a large proportion of their income on food.
"Low-income food deficit countries saw their food bill rise 20 percent in 2021, an increase of $120 billion," she said. "Thirty-five African countries import food from Ukraine, Russia or both. The problem of high food prices compounded by high oil prices and expensive fertilizer represent a threat to future crop yields."
Egypt and Tunisia import about 80 percent of their wheat from Ukraine and Russia. Other countries, such as Lebanon and Haiti, also depend heavily upon wheat imports from these countries. The World Food Program warns the ongoing war in Ukraine will increase global hunger.
Ukraine is due to harvest its winter crop in July and plant next season's crop in September. Okonjo-Iweala says it is crucial that farmers be allowed to cultivate and harvest their wheat crops to lessen a food crisis.