Russia's war of aggression in Ukraine is slowing down the global economy.

The World Trade Organization (WTO) expects international trade in goods to grow by just 3 percent this year.

Before the war broke out, she had still expected an increase of 4.7 percent.

For 2023, the WTO expects growth of 3.4 percent.

The WTO lowered its growth forecast for global gross domestic product in 2022 from 4.1 to 2.8 percent on Tuesday.

John Knight

Correspondent for politics and economy in Switzerland.

  • Follow I follow

Henrik Ankenbrand

Economic correspondent for China based in Shanghai.

  • Follow I follow

According to WTO chief economist Robert Koopmann, the war is not the only reason for the gloomy outlook.

The spread of Omikron, the end of the Corona aid, high inflation and rising interest rates have clouded the prospects.

The war in Ukraine not only caused immeasurable human suffering but also damaged the global economy at a critical juncture, said WTO Director-General Ngozi Okonjo-Iweala.

"Its impact will be felt around the world, especially in low-income countries where food is a large part of household spending."

In Africa alone, 35 countries imported wheat from Russia or Ukraine.

The Nigerian warned against building separate trading blocs in response to the misery.

This would significantly increase the cost to the global economy.

It's not the right time to turn inward.

In a crisis, more trade is needed to ensure stable and equitable access to essential goods.

China zero covid policy

According to a survey by Allianz Trade (formerly Euler Hermes), more and more German exporters fear increasing payment defaults and supply chain disruptions.

"The Russian invasion of Ukraine and the renewed outbreak of Covid-19 in China hit world trade twice as hard with lower volumes and higher prices," said Ana Boata, economist at Allianz Trade.

Due to war-related detours and port closures, there are long transport times.

"This means that delays and high freight rates will persist in world trade longer than originally expected - also due to the high energy prices."

The global economy is experiencing additional pressure from China's zero-Covid policy.

According to a survey by the Beijing analysis house Gavekal, only 13 of the 100 largest cities in the country are free of restrictions intended to keep residents at home due to the increasing number of infections with the Omicron virus variant.

The affected cities and regions are responsible for 54 percent of China's economic output.

The cities with the greatest freedom restrictions are Shanghai, which, including the surrounding regions, accounts for up to a quarter of China's gross domestic product.

Then there is Jilin, a province where many car manufacturers such as Volkswagen are based, whose plants have been idle for weeks.

In Shanghai, the residents of individual blocks of flats have been released back into “freedom” since Monday.

However, that hardly changes the fact that people are still unable to go to work.

Those who are able to leave their homes are only allowed to move within an extremely limited radius - often only in a few surrounding streets.

Only a few shops are open;

in many cases they are closed again by the authorities after a short time.

It has been heard from employees of German companies in the city that many are coming and those who were supposed to take up a position in a branch in the city or in surrounding areas do not want to do it and fly back to Germany.

"Trap" for China's supply chains

Even reporters from Chinese state media are now making the nationwide restrictions on movement an issue, which would become a "trap" for China's supply chains.

In the region around Shanghai in particular, the exits from the freeways are blocked to check truck drivers for Covid.

There is obviously chaos: some provinces require a special passport when crossing the border, others require a Covid test on the spot, and others completely refuse drivers entry if there is a suspicion that they have driven through regions with high numbers of infections.

The rules are changing quickly and are difficult to follow.

It is true that China did not completely close its ports as during the Covid outbreaks last year.

Nevertheless, due to the restrictions on truck drivers, freight numbers in ports like Shanghai have fallen sharply.

The world's largest container shipping company MSC compared the situation to a "traffic jam".

Banks like Morgan Stanley and Citi have lowered their forecasts for Chinese economic growth this year by around half a percentage point.