World Trade Organization (WTO) economists have lowered their forecast for world trade growth in 2015 and 2016 due to a slew of factors including weaker import demand from China and falling oil prices, the WTO said on Wednesday
WTO economists cut their 2015 global trade growth forecast for 2015 to 2.8 percent, from the 3.3 percent forecast made in April, and reduced their estimate for 2016 to 3.9 percent from 4.0 percent.
According to the WTO, falling import demand in China, Brazil and other emerging economies; falling prices for oil and other primary commodities; and significant exchange rate fluctuations weighed on the global economy in the first half of 2015.
Volatility in financial markets, uncertainty over the changing stance of monetary policy in the United States and mixed recent economic data have clouded the outlook for the world economy and trade in the second half of the year and beyond, the WTO said.
“Trade can act as a catalyst for economic growth. At a time of great uncertainty, increased trade could help reinvigorate the global economy and lift prospects for development and poverty alleviation,” Director-General Roberto Azevêdo said in a statement.
“WTO members can help to set trade growth on a more robust trajectory by seizing the initiative on a number of fronts, notably by negotiating concrete outcomes by our December Ministerial Conference in Nairobi,” Azevêdo said.
If current projections are realized, 2015 will mark the fourth consecutive year in which annual trade growth has fallen below 3 percent and the fourth year where trade has grown at roughly the same rate as world GDP, rather than twice as fast, as was the case in the 1990s and early 2000s.
Global output is still expanding at a moderate pace but risks to the world economy are increasingly on the downside.
These include a sharper-than-expected slowdown in emerging and developing economies, the possibility of destabilizing financial flows from an eventual interest rate rise by the US Federal Reserve, and unanticipated costs associated with the migration crisis in Europe.
At the time of WTO last forecast in April 2015, world trade and output appeared to be strengthening based on available data through 2014 fourth quarter (Q4). However, results for the first half of 2015 were below expectations as quarterly growth turned negative, averaging 0.7 percent in Q1 and Q2.
Quarterly export growth of developed economies was essentially flat in the first two quarters of 2015 (-0.2 percent on average in Q1 and Q2), but those of developing countries were more negative (1.9 percent). The drop in exports was driven by weaker developing countries’ imports (-2.2 percent) and stagnation in developed countries’ imports (+0.1%).
Trade growth remains uneven across countries and regions, which shows WTO merchandise trade volume indices by geographical region.
After a long period of stagnation, Europe recorded the fastest year-on-year export growth of any region in Q2 at 2.7 percent, followed by North America (2.1 percent), Asia (0.6 percent), South and Central America (0.4 percent) and Other Regions (-1.0 percent, including Africa, the Commonwealth of Independent States and the Middle East).
Disparities between regional growth rates was stronger on the import side than on the export side, with positive growth of 6.5 percent in North America, 3.1 percent in Asia and 1.6 percent in Europe, and declines of 2.3 percent in South and Central America and 3.1 percent in other regions.