WTO Lowers Forecast for World Trade in 2016 and 2017
World trade will grow more slowly than expected in 2016, expanding by just 1.7%, well below the April forecast of 2.8%, according to the latest forecast by the World Trade Organization. With expected global GDP growth of 2.2% in 2016, this year would mark the slowest pace of trade and output growth since the financial crisis of 2009, it said.
The contraction was driven by slowing GDP and trade growth in developing economies such as China and Brazil but also in North America, which had the strongest import growth of any region in 2014-2015 but has decelerated since then, WTO said.
If the revised projection holds, 2016 will be the first time in 15 years that the ratio between trade growth and world GDP has fallen below 1:1, it said.
A number of reasons have been advanced to explain the decline in the ratio of trade growth to GDP growth in recent years, WTO said in a release, including the “changes in the import content of demand,” absence of trade liberalization, creeping protectionism, a contraction of global value chains, and possibly the increasing role of the digital economy and e-commerce, but all have likely played a role.”
This dramatic slowing of trade growth “is serious and should serve as a wake-up call. It is particularly concerning in the context of growing anti-globalization sentiment,” WTO Director-General Roberto Azevêdo said in a statement.
“We need to make sure that this does not translate into misguided policies that could make the situation much worse, not only from the perspective of trade but also for job creation and economic growth and development which are so closely linked to an open trading system,” Azevêdo said.
Historically strong trade growth has been a sign of strong economic growth, as trade has provided a way for developing and emerging economies to grow quickly, and strong import growth has been associated with faster growth in developed countries, according to the group.
WTO also revised its forecast for 2017, with trade now expected to grow between 1.8% and 3.1%, down from 3.6% previously.
Yet the increase of the number of systematically important trading countries and the shift in the ratio of trade and GDP growth makes it more difficult to forecast future trade growth, it said.
