WTO warns global economy could lose 5% of GDP

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The world’s decoupling into two trading blocs could be destructive, according to Ngozi Okonjo-Iweala

The global economy is showing signs of fragmentation, which could be “very costly” for all, World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala has warned.

In an interview with Nikkei on Sunday, the WTO chief voiced concerns about the escalation of the Israel-Hamas conflict and its potential impact on global growth if it spills over to the wider Middle East.

“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.” 

According to the WTO, the outlook for 2024 is still relatively optimistic, with growth projected at about 3.3%, “but the risks are heavily to the downside.” 

The WTO estimated that if the world splits into two trading blocs, global GDP will drop 5% in the longer term. This would be a “huge loss,” Okonjo-Iweala cautioned, equating it to losing the entire economy of Japan.

Nevertheless, the WTO does not see “big signs of a broader de-globalization,” according to its chief, who said the volume of trade in goods and services is “still quite substantial,” at about $31 trillion.

Earlier this month, the WTO slashed its 2023 forecast for global trade growth to 0.8% from the previously estimated 1.7%, citing a deepening manufacturing slowdown.

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