World Trade Organization (WTO) economists have reduced their forecast for global trade growth this year in response to weaker than expected economic growth and lower import demand in regions like South and Central America.
The new forecast for growth in world trade in 2014 is 3.1%, down from April’s 4.7% forecast, and the estimate for 2015 was lowered to 4 percent from 5.3%.
WTO director-general Roberto Azevedo said, “International institutions have significantly revised their GDP forecasts after disappointing economic growth in the first half of the year,” adding that uneven growth and continuing geopolitical tensions will still be a risk for trade and output in the remainder of the year.
“This is a moment to remind ourselves that trade can play a positive role here. Cutting trade costs and broadening trade opportunities can be a key ingredient to reversing this trend,” Azevedo said.
According to the WTO, although trade growth has strengthened somewhat in 2014, it remains unsteady. In the first quarter of the year, U.S. output dipped 2.1%, and in the second quarter, Germany’s fell 0.6%, “sapping” global import demand. China’s GDP growth also slowed, going from 7.7% last year to 6.1% in Q1 2014 before picking up again in the second quarter.
“As a result of these and other factors, global trade stagnated in the first half of 2014, as the gradual recovery of import demand in developed countries was offset by declines in developing countries,” a WTO statement noted.
World trade, (the average of exports and imports) increased just 1.8% in the first half of the year compared to the same period in 2013, WTO Secretariat figures show. Asia saw the fastest export growth in the period with a 4.2% rise year-over-year, followed by North America with 3.3% and Europe with 1.2%. South and Central America experienced a 0.8% decline in export growth.
Growth in trade and output is expected to pick up in the second half of this year as governments and central banks could provide support to stimulate growth, but the WTO forecast points to several risk factors that could potentially worsen economic conditions.
“Tensions between the European Union and the United States on the one hand and the Russian Federation on the other over Ukraine have already resulted in trade sanctions on certain agricultural commodities, and the number of products affected could widen if the crisis persists,” WTO noted. “Conflict in the Middle East is also stoking uncertainty, and could lead to a spike in oil prices if the security of oil supplies is threatened. Finally, an outbreak of Ebola hemorrhagic fever in West Africa has proven difficult to contain, and any spread of the disease could trigger a broader panic with major economic implications for West Africa, and perhaps even beyond the region. The presence of several such low probability/high cost risk factors has made the trade forecast particularly difficult to gauge this year.”