The World Trade Organization’s chief said on Tuesday she believes the world is heading towards a global recession due to multiple colliding crises, and called for radical policies to revive growth.
WTO Director-General Ngozi Okonjo-Iweala said Russia’s war in Ukraine, the climate crisis, food price and energy shocks plus the aftermath of the Covid-19 pandemic were creating the conditions for a world recession.
“Now we have to weather what looks like an oncoming recession,” she told the opening of the global trade body’s annual public forum in Geneva.
“I think a global recession. That’s what I think we are edging into. But at the same time, we have to start thinking of the recovery. We have to restore growth.”
She noted that the World Bank and the International Monetary Fund had both downgraded global growth forecasts, while indicators on trade numbers were “not looking too good”.
Okonjo-Iweala added: “We have security shocks, we have climate shocks, we have energy shocks, we have food price shocks, and all of this hitting countries at the same time, so we cannot afford to do business as usual.”
The former Nigerian finance and foreign minister said central banks were in a tight spot, with little choice over the course ahead.
“Central banks don’t really have too much of a choice but to tighten and increase interest rates — but the repercussions on emerging markets and developing countries is quite severe, because they too are tightening an increase in interest rates,” she said.
“But what happens in the developed countries affects their debt burdens, affects what they have to pay to service debt, affects the flight of capital from their economies back into the developed countries.
“But right now, I think there’s not much choice but for central banks to act because inflation really hits at the poor very badly.” She stressed the need for central banks to determine whether inflation was being caused by strong demand or whether the rise in prices was linked to structural problems on the supply side.
Okonjo-Iweala said her top concern was how to ensure food security, followed by access to energy.
“The spectre of not having enough food is one that worries me,” she said.
The head of the World Trade Organization said on Tuesday the 164-member body can negotiate more ambitious deals, such as on agriculture, climate change and internal reform by its next major meeting, after concluding a series of trade deals in June.
The agreements were the first for the trade watchdog in years and included a fishing deal and one to boost supplies of COVID-19 vaccines, although there were many compromises and some areas remain unresolved.
“I do believe that this (the Geneva package) will provide a basis for more confidence that we can do multilateral work together,” Ngozi Okonjo-Iweala told Reuters at the opening of a forum at the WTO’s Geneva headquarters.
“(This) provides a basis for hope that we can move forward and look at other difficult issues,” she said, adding that she hoped for deals on some topics by the next ministerial meeting (MC13), due no later than March 2024. One of these areas is an update to the WTO’s own rule book.
The WTO’s top dispute settlement body has been paralysed since 2019 when Washington blocked the appointment of new judges. Talks are ongoing about rebooting it.
“I hope at MC13 we will be able to deliver slices of the WTO reform agenda,” Okonjo-Iweala said.
Delegates say one of the toughest areas of future negotiations will be the extension of a hard-won deal on a partial waiver of intellectual property rights for COVID-19 vaccines to drugs and tests as sought by India and others.
“What I’m sensing is its going to be difficult but we do have a deadline to deliver and we are working hard,” she said.
WTO members struck an agreement to cut subsidies that contribute to over-fishing but it will require two-thirds of countries to ratify it. Okonjo-Iweala said she was hoping this could be done within six to nine months.
Oil rose by $2 a barrel on Tuesday from a nine-month low a day earlier, supported by supply curbs in the U.S. Gulf of Mexico ahead of Hurricane Ian and a slight softening in the U.S. dollar.
Prices also drew support from analyst expectations of possible supply cuts from the Organization of the Petroleum Exporting Countries and allies (Opec+), which meets to set policy on Oct. 5.
Brent crude was up $2.35, or 2.8%, to $86.41 a barrel at 10:52 a.m. EDT (1452 GMT). On Monday it fell as low as $83.65, the lowest since January. US West Texas Intermediate (WTI) crude was up $2.04, or 2.7%, at $78.74.