Strong demand for imports from developing countries is driving a recovery in world trade this year: S&P

In 2018, the WTO forecasts trade growth between 2.1% and 4%.

The Dollar Business Bureau

Imports are likely to drive a recovery in world trade this year. According to S&P Global Ratings’ report released recently, world trade growth is gaining momentum after a prolonged period of weakness. Import growth picked up last year in November and continued to sail on the same strong note into 2017.

Early months of 2017 saw global imports rise by 4.1% according to the data published by the Netherlands’ Bureau for Economic Policy Analysis. However, the volume of world trade decreased in February by 0.6% while January recorded a 1% increase. World industrial production grew 0.2% month on month and world industrial production momentum was 0.9%.

According to an S&P economist “This pickup in global trade is benefiting the economies of the EU, the world’s largest exporter of manufactured goods and services,” noting that German exports in the first quarter had rebounded to 5.5% y-o-y while Spain declared a 13% gain in Jan-Feb.

Emerging economies saw their imported volumes increasing nearly 10% in the early month of 2017 after a stagnation in 2016 while developed economies, recorded a slow import growth at 0.4% with just the exception of US, which showed a sharp increase in import demand during the start of 2017.

S&P analysts attribute two major reasons for surge in the imports- the recovery of commodity prices which helped Russia and Brazil from falling into an economic recession and secondly the recent appreciation in the market currencies of many emerging countries.

In April the WTO released in its forecast that, “global trade will expand by 2.4% in 2017; however, as deep uncertainty about near-term economic and policy developments raise the forecast risk, this figure is placed within a range of 1.8% to 3.6%.”

In 2018, the WTO is forecasting trade growth between 2.1% and 4%.

The Dollar Business Bureau - May 19, 2017 12:00 IST