WTO slashes 2014 global trade growth forecast to 3.1%
The Dollar Business Bureau | @TheDollarBiz
The World Trade Organisation (WTO) has lowered its forecast for global trade growth in 2014 to 3.1%, down from 4.7% estimated in April this year. WTO says that the downward revision is mainly due to sub-par trade growth in the first half of 2014. WTO economists have also lowered their estimate for trade growth in 2015 to 4% (down from 5.3% estimated in April) in anticipation of continued geopolitical tensions and uneven growth in the coming months. WTO Director-General Roberto Azevêdo said, “International institutions have significantly revised their GDP forecasts after disappointing economic growth in the first half of the year. In light of this, the WTO’s forecasts for trade growth have also been revised downwards for 2014 and 2015. Uneven growth and continuing geopolitical tensions will remain a risk for both trade and output in the second half of the year.
Recently, OECD said that economic growth across regions remain uneven and had emphasised that EU needs to provide an impetus to its economies to help increase demand and prevent a slide into recession again. Global trade has been struggling to recover to the double-digit growth last seen in 2010, when merchandise trade grew 13.9% Y-o-Y, helped by a robust export growth (22.6%) in Asia and high import demand (22.4%) in South and Central America. However, global merchandise trade slumped to 5.4% in 2011 and slid further to 2.2% in 2013. Export growth in Asia is now estimated at around 5% in 2014, while import demand in South and Central America is expected to decline 0.7%. The WTO says that the economies in South America, Africa and Middle East have been adversely affected by civil conflict, weak non-fuel commodity prices, and slower growth in trading partners in Asia. However, a resilient import demand in North America indicates that consumption may be increasing in the region due to lower unemployment rates.
There were indications in April 2014 that global trade will recover this year, but trade and manufacturing growth have been below expectations so far. Output declined in USA by around 2.1% Y-o-Y in Q1 2014, and by around 0.6% in Germany in Q2. China’s GDP growth in Q1 also declined to 6.1%, compared to 7.7% in 2013. The WTO warns that global trade could be adversely affected by the ongoing geo-political tensions and other trade factors, including sanctions due to the Ukraine crisis, tensions between EU and USA, conflict in the Middle East, and the Ebola outbreak in West Africa. According to the WTO, trade liberalisation can help put the global economy back on track. “This is a moment to remind ourselves that trade can play a positive role here. Cutting trade costs and broadening trade opportunities can be a key ingredient to reversing this trend,” WTO Director-General Roberto Azevêdo said.
This article was published on September 24, 2014.