The World Trade Organization (WTO) has raised an alarm over the increasing fragmentation within the global economy, emphasizing the potentially dire consequences for all nations.
In an interview with Nikkei on Sunday, Director-General Ngozi Okonjo-Iweala expressed concerns about the burgeoning Israel-Hamas conflict and its potential spillover effects on global economic growth, particularly in the wider Middle East region.
“That is one of the regions where a lot of the world’s oil and gas comes out of,” Okonjo-Iweala pointed out. “So inevitably this will have an impact.”
Despite a relatively positive outlook for 2024, with a projected growth of around 3.3%, the WTO’s Director-General underscored significant downward risks. Should the world fracture into two separate trading blocs, the WTO has estimated a staggering 5% plunge in global GDP over the long term. This drastic decline, according to Okonjo-Iweala, would equate to the complete economic output of a country the size of Japan.
While highlighting these critical warnings, the WTO’s chief also pointed out that there are currently no substantial indications of a widespread de-globalization trend. Okonjo-Iweala noted that the volume of global trade in goods and services remains significant, valuing at an estimated $31 trillion.
This cautionary stance comes in the wake of the WTO’s recent revision of its 2023 global trade growth forecast, reducing it to a mere 0.8% from the initial 1.7%.
The organization cited an intensifying slowdown in manufacturing as a key contributing factor to the downward adjustment.
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