That trade has been slow going isn’t new news, but now the World Trade Organization says growth will be even slower than expected.
Trade will likely only grow 1.7% in 2016, well below the WTO’s earlier estimate of 2.8%. Next year won’t be much better either as forecasts for 2017 have been revised down from 3.6% to between 1.8% and 3.1%.
“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,” WTO said in a statement Tuesday.
The downgrade comes as a result of a bigger than expected drop in merchandise trade volumes (-1.1%) for the first quarter and a rebound that was too small to write home about in the second quarter (+0.3%).
Slowing GDP and trade growth in China, Brazil and North America helped fuel the contraction.
“The dramatic slowing of trade growth is serious and should serve as a wake-up call,” WTO director-general Roberto Azevêdo said. “It is particularly concerning in the context of growing anti-globalization sentiment. 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.”
Trade has typically growth 1.5 times faster than GDP, but in recent years that ratio has been more like 1:1.
“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,” WTO said.
Expressing disappointment over both the current trade environment—calling for systems that are more inclusive—and the weakening relationship between trade and GDP growth, WTO said now is the time to “re-commit to openness in trade,” to foster much-needed economic growth.