WTO slashes world trade growth forecast 3.1%

PHD Research Bureau

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sunitag@phdcci.in

Sep 26 at 6:10 PM

WTO slashes world trade growth forecast to 3.1%

 Uneven global growth and continuing geopolitical tensions will remain a risk for both trade and output in the second half of the year

WTO revised its forecast for world trade growth in 2014 to 3.1% down from the 4.7% forecast made in April and cut estimate for 2015 to 4.0% from 5.3% previously. The downgrade is in response to weaker-than-expected GDP growth and muted import demand in the first half of 2014, particularly in natural resource exporting regions such as South and Central America . As global growth remains uneven and as geopolitical tensions and risks have risen, risks to the forecast remain predominantly on the downside,.

In the last forecast released in April 2014, conditions for stronger trade growth appeared to be falling into place after a two year slump that saw world merchandise trade grow just 2.2% on average during 2012-13, roughly equal to the rate of growth of world gross domestic product (GDP). However, leading indicators at the time points to an upturn in developed economies and E urope in particular. Although growth has strengthened somewhat in 2014, it has remained unsteady. Output fell in the first quarter in the United States (–2.1%, annualized rates) and in the second quarter in Germany (–0.6%), weakening global import demand. China ’s GDP growth also slowed from 7.7% in 2013 to 6.1% in the first quarter of 2014 before rebounding in the second. The slow first quarter contributed to weak exports in trading partners.

 World merchandise trade and GDP, 2010-2015*                                              (Annual % change)

Source: PHD Research Bureau, compiled from WTO

^*Figures for 2014 and 2015 are projections.

Growth in trade and output is expected to be somewhat stronger in the second half of 2014 as governments and central banks may provide policy support to boost growth, and as idiosyncratic factors that weighted on trade in the first half (e.g. harsh winter weather in the United States, a sales tax rise in Japan, etc.) begin to fade. However, several risk factors on the horizon have the potential to produce worse economic outcomes.