The headquarters of the World Trade Organization in Geneva. picture alliance/dpa | Valery Sharifulin
The World Trade Organization’s chief economist, Ralph Ossa, said Monday that the group’s previous estimates of global trade growth were “too optimistic.”
The concerns are fueled by attacks by Houthi militants from Yemen on merchant ships in the Red Sea.
Despite the chaos, Ossa continues to believe in the resilience of international trade and the global economy.
This is a machine translation of an article from our US colleagues at Business Insider. It was automatically translated and checked by an editor.
The World Trade Organization (WTO) is likely to cut its forecasts for trade in 2023 and 2024 due to weaker-than-expected global economic activity and disruptive attacks by Houthi militias in the Red Sea.
Previous WTO forecasts were “too optimistic”
The WTO had previously predicted an increase in goods trade volumes of 0.8 percent in 2023 and 3.3 percent in 2024. But now escalating tensions in the Red Sea following attacks on merchant ships by the Iran-backed Houthis have heightened WTO concerns. The chief economist Ralph Ossa explained “Reuters” on Mondaythat the group’s previous forecasts were “too optimistic”.
Ossa said the WTO will release updated forecasts in the coming months and various global organizations have lowered their GDP growth forecasts for this year, impacting the WTO’s trade forecasts. He also pointed to an increasing increase in consumer prices due to the sharp rise in transportation costs since the Houthi attacks began.
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This is how the attacks in the Red Sea affect world trade:
As the Houthi militias continue to target merchant ships in the Red Sea with drone and missile attacks, the supply chains of companies shipping energy commodities such as oil, energy and natural gas, or raw materials such as coffee, have been disrupted. Numerous major shipping companies have decided to reroute or cancel their deliveries through the region.
Military responses by US and UK air and naval forces have successfully repelled some attacks but have not stopped them. US President Joe Biden has acknowledged that the attacks are unlikely to completely deter the Houthis from attacking shipping routes.
Experts say the unrest at the Suez Canal, combined with steady economic growth, could trigger another surge in inflation this year.
The merchant ship Galaxy Leader is escorted by Houthi rebels, photo taken November 20, 2023. Houthi Military Media/Handout
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World trade is robust despite problems
However, the WTO’s Ossa also stressed that trade in goods is expected to be higher this year than in 2023, adding that the global economy and global trade remain resilient despite recent geopolitical issues and fears of slower growth.
If the disruptions continue, inflation concerns are expected to remain in Europe, but are unlikely to lead to a massive economic shock like the pandemic.
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