New Delhi : The Russia-Ukraine war could touch food shortages in poor countries, the World Trade Organization warned on Tuesday as it slashed its global trade growth forecast for the year from 4.7% to 3%.
The World Trade Organization said prospects for global growth in trade trade have “darkened” since the war, with the Covid-19 lockdown in China increasing tensions on the global supply chain.
The international trade watchdog warned that the lockdown in China, which has a harsh zero-tolerance approach to the pandemic, could lead to shortages of manufacturing inputs and high inflation by disrupting maritime trade.
“The organization now expects trading volume to increase by 3% in 2022 – down from its previous forecast of 4.7% – and 3.4% in 2023, but these estimates are less certain than usual due to the fluid nature of the conflict,” it said. Said in the testimony.
Despite their small shares in world trade and production, Russia and Ukraine are major suppliers of essential goods, including food, energy and fertiliser, whose supplies are now under threat from war, the World Trade Organization said.
“Shipments of grain through Black Sea ports have already been halted, with potentially serious consequences for food security in poor countries,” the Geneva-based body said.
Prime Minister Narendra Modi said during a conversation with US President Joe Biden on Tuesday that India is ready to supply food to the world if the World Trade Organization allows it. The WTO estimated that higher oil prices could reduce real income and import demand around the world, and that higher natural gas prices would probably have an even greater impact in Europe.
WTO Director-General Ngoji Okonjo-Iwela urged countries to avoid turning inward, saying more trade is needed to ensure stable, equitable access to necessities. “Short supplies and high food prices mean that the world’s poor may be forced to do nothing. This should not be allowed to happen. Restricting trade will threaten the well-being of families and businesses and make the task of building a sustainable economic recovery from COVID-19 more difficult,” Okonjo-Iwela said.
The effects of the war are being felt around the world in the context of rising inflation, but low-income countries, where food constitutes a major part of household spending, suffer the most, he said.
Forecasting risks are mixed and difficult to assess objectively, the WTO said, adding that there is some upside potential if the war in Ukraine ends sooner than expected, but considerable if the fighting continues for a longer period of time or escalates. There is downside risk.
The WTO estimated that Western sanctions on Russian businesses and individuals are likely to have a strong impact on commercial services trade as Russia is a net services importer, with imports of $74 billion in 2021 and total exports of $55 billion. World trade trade grew 26% in 2021, with export and import prices rising 15% for the year on average, the World Trade Organization said. The dollar value of trade increased by 59% in fuel and mining products, by 19% in agricultural products and by 21% in manufacturing goods.