World merchandise trade is seen flat this year, growing by the same rate as last year at 2.8 percent, but is expected to pick up by 2017, the World Trade Organization (WTO) said.
In its global merchandise trade forecast, WTO said that weakness in global demand will still persist this year but is projected to recover in 2017.
“The overall result in trade terms was growth of 2.8 percent, making 2015 another year of weak but positive expansion in global trade. Turning to 2016, we are predicting that trade growth will remain constant, at 2.8 percent,” WTO Director-General Roberto Azevêdo said in a statement.
“On this basis, 2016 will be the fifth consecutive year of sub 3-percent growth. While this is clearly a disappointing picture, it is not unprecedented. In fact, trade growth was weaker in the early 1980s. And we expect to come out of this pattern of low growth in the coming years. For 2017, we are forecasting the trade growth will pick up to 3.6 percent,” he added.
The WTO said despite the same weak trade situation this year, 2017 will be a different story with growth in developed countries seen slowing and developing countries making a comback.
In 2015, Azevêdo said the more than 60 percent drop in oil prices and 20 percent appreciation of the US dollar plagued world merchandise trade. But this was somewhat offset by the strengthening import demand in the European Union and the United States, supporting exports of their trade partners.
The WTO official pointed out that the trade forecasts are based on world gross domestic product (GDP) projections of 2.4 percent in 2016 and 2.7 percent in 2017.
“Risks to these forecasts remain mostly on the downside, such as from further slowing in emerging economies, and volatility in financial markets. Indicators of business and consumer sentiment have turned more negative recently. However, there is also some limited upside potential if monetary policy, which is already in place, succeeds in lifting growth in the Euro area,” Azevêdo said.
Asia was the key driver of world trade from 2011 to 2013, the WTO director general said, but that momentum has shifted in the last two years. He said demand in EU and the US is currently making up for the slowdown seen in Asia.
“…If Asia’s contribution to trade had matched its average of recent years, world trade would have grown 3.5 percent rather than 2.8 percent in 2015,” Azevêdo said.
For this year, the WTO is projecting that merchandise exports will increase by 2.9 percent for developed countries and 2.8 percent for developing countries.
Imports, on the other hand, are expected to grow more substantially in developed countries—mainly in the EU and the US—with the WTO projecting them to rise 3.3 percent versus the projected 1.8 percent growth in developing countries.
Asia is expected to log the fastest export growth this year at 3.4 percent, followed by North America and Europe, each at 3.1 percent. For imports, North America is seen to record the highest growth at 4.1 percent this year, while Asia and the EU are both projected to register 3.2 percent growth.
“Risks to the trade forecasts remain tilted to the downside. Business and consumer confidence has slipped recently in developed countries. As a result, forecasters now expect slower GDP growth in the European Union and the United States in 2016, followed by a rebound in 2017. Financial instability in Asia has mostly abated but could return if economic data come in above or below market expectations. On the other hand, more accommodative monetary policy from the European Central Bank could spur growth in the euro area and boost demand for goods and services, including imports,” the WTO report concluded.