War and Pandemic slow but don't stop World Trade

In late April, the International Monetary Fund released the latest economic outlook: "War Sets Back the Global Recovery". On the basis of latest data, ExportPlanning has developed a forecast scenario for world trade, declined by country and product.

The ExportPlanning World Trade Prediction Model

The forecasting model behind the ExportPlanning Information System is relatively simple, and is based on the elasticity of imports to GDP changes and long-term trend phenomena. Among the various factors that determine a country's foreign imports, the model therefore considers only two factors, but they are the ones that produce the greatest effects:

1. An higher spending capacity of households and businesses toward goods offered by foreign companies, expressed by the change in the country's Gross Domestic Product in foreign currency
2. Changes in consumer and household preferences, firms' competitive strategies, or distribution systems that are significant enough to be captured by trend-type variables.

The Macro Scenario is obtained by aggregating product-level and country-level forecasts

An advantage of the ExportPlanning method is to develop disaggregated analyses at the level of single product, single market, and single competitor country. Based on this model, it is possible to have an assessment of the future outlook of macroeconomic phenomena as a result of the aggregation of thousands of micro factors, in which each microeconomic phenomenon has a weight proportional to its effective size.

The following table provides a summary of the numbers that characterize this baseline scenario.

Forecast scenario: annual rates of change

The numbers shown in the table allow us to point out some relevant phenomena, which characterize the current economic outlook:

• Economic damage caused by the Russian-Ukrainian conflict will contribute to a significant slowdown in global growth in 2022 and an increase in inflation. Specifically, the growth of the global economy is expected to slow from 6.1 percent in 2021 to 3.6 percent in 2022-2023. Under this scenario, the effect of the war can be estimated as lower growth of 0.8 and 0.2 percentage points for 2022 and 2023 respectively
• The European Union will continue to grow at a rate almost one percentage point below the global average, similar to what has happened in recent years. On the other hand, Asia will continue to be the main driver of development in the international economy, growing at 4.3 percent and 4.7 percent in 2022-2023
• The depreciation of the euro against the dollar, expected during 2022, will support global purchasing power in euros. In fact, the rate of change in global GDP in euros turns out to be 12.7 percent in 2022, significantly accelerating from 8.6 percent in 2021
• After the strong rebound in world trade that characterized 2021, the effects of the war in Ukraine and difficulties in global logistics will lead to a marked slowdown in global trade. It should be emphasized, however, how economic information signals that the ongoing deceleration is certainly significant, but far from translating into a break in the recovery cycle of world trade that began in the second half of 2020
• Thanks to the euro effect, world demand for manufactured goods expressed in euros will grow close to double digits in 2022.

Wolrd trade forecast by industry

In order to highlight the phases of acceleration and deceleration that may characterize world demand by industry in the coming year, the following graph compares the rates of change recorded between 2019 and 2021 with those expected in 2022.