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Geopolitical tensions, energy insecurity and the risk of financial instability are darkening the overall outlook for trade despite year-on-year growth, according to the World Trade Organization (WTO).

The volume of world merchandise trade rose by 2.7% in 2022, while the value jumped by 12.4% due to steep commodity prices worldwide triggered by the war in Ukraine and economic recovery from the Covid-19 pandemic. The Middle East saw the biggest uptick in value by region, rising 31%.

But the WTO expects trade and output growth to be below par in 2023, as “stubbornly high inflation and tighter financial conditions weigh on consumption and investment”.

With merchandise trade volumes in the first quarter of 2023 down 1% compared to the same period last year, the organisation says that trade growth must be more robust over the rest of the year if its 1.7% forecast is to be met.

“As a succession of crises buffet the global economy, with the Covid-19 pandemic giving way to the war in Ukraine, inflation, monetary tightening, and widespread debt distress, world trade has lost momentum, with trade growth slowing in 2022 and remaining weak into early 2023,” WTO director-general Ngozi Okonjo-Iweala says in the introduction to this year’s World Trade Statistical Review.

Despite emphasising trade’s positive growth and its key role in “economic recovery and resilience”, Okonjo-Iweala notes that “numerous downside risks, from geopolitical tensions to potential financial instability, are clouding the medium-term outlook for both trade and overall output”.

Lenders reflect similar concerns about the risk outlook for the coming months. HSBC’s interim 2023 results show that revenue for global trade and receivables finance was down 3% due to “the softer trade cycle”, driven in part by inflation and trade restrictions imposed on Russia and China.

Standard Chartered’s half-year report also flags up the mounting geopolitical tensions, singling out the influx of subsidies for green industries – such as the US’ Inflation Reduction Act – as running the risk of “distorting world trade flows and antagonising trading partners”. The lender’s income from trade and working capital was largely flat in the first half of 2023.

Okonjo-Iweala notes that the “need to deepen, deconcentrate and diversify international supply networks” will give developing economies “significant commercial opportunities”.

China remained the top merchandise exporter in 2022, but its share in world exports declined to 14%, down from 15% in 2021.

Exports of goods and services from the least-developed countries jumped by 31% between 2019 and 2022, with goods exports up 41% in value terms.

World exports of intermediate goods – those used to produce a final product, including critical metals and minerals – fell from a 9% year-on-year increase in the first quarter of 2022 to a 10% decline in Q4.

Exporters from African countries, however, saw a spike in intermediate goods exports. The Democratic Republic of the Congo saw growth of 46%, with exports of metals such as copper, iron, gold, cobalt, rhodium and palladium going to China, Spain and Saudi Arabia.

Morocco and Egypt also saw jumps of 13% and 16% respectively for goods including inputs for the fertiliser industry.