A turbulent 2015 may be behind us, but according to the World Trade Organization, uncertainties will still weigh on 2016 trade.
The past year brought with it an oil price plunge of more than 60 percent, a U.S. dollar appreciation around 20 percent and a slowing Chinese economy. And 2016, it seems, won’t fully recover from the tumult.
World trade growth volume will be sluggish this year at 2.8%, flat to last year, the WTO said in its 2016 global trade forecast. The figure was revised downward by more than 1 percentage point from the WTO’s rosier September projection of 3.9% growth.
What’s more, the Chinese economy will see a “sharper than expected” slowing, financial market volatility will worsen and countries with large foreign debts will be exposed to sharp exchange rate movements.
“Trade is still registering positive growth, albeit at a disappointing rate,” WTO director-general Roberto Azevêdo said. “This will be the fifth consecutive year of trade growth below 3 percent. Moreover, while the volume of global trade is growing, its value has fallen because of shifting exchange rates and falls in commodity prices. This could undermine fragile economic growth in vulnerable developing countries. There remains as well the threat of creeping protectionism as many governments continue to apply trade restrictions and the stock of these barriers continues to grow.”
One way to lift economic growth, Azevêdo said, will be for WTO members to roll back trade restrictive measures and implement the WTO Trade Facilitation Agreement, which is expected to cut global trade costs by 15 percent and boost trade by up to $1 trillion a year.
“More can also be done to address remaining tariff and non-tariff barriers on exports of agricultural and manufactured goods,” Azevêdo added.
Considering the forecast for 2016, world trade will have grown at pretty much the same rate as world GDP for five years instead of twice as fast world GDP as has happened in the past.
“Such a long, uninterrupted spell of slow but positive trade growth is unprecedented, but its importance should not be exaggerated,” the WTO said in its report. Trade growth was weaker than it is now between 1980 and 1985, when five of the six years saw growth below 3 percent, including two years of contraction.
Economic and trade activity indicators have pointed to both positives and negatives concerning growth, leaving mixed feelings about the start of 2016. On the upside, container throughput at major ports has picked up since last year’s trade slowdown. On the downside, however, indicators from the Organization for Economic Cooperation and Development point to an easing of growth in OECD member countries and more financial market volatility, meaning 2016 could see volatile trade growth, too.
Looking ahead, global trade growth is expected to rise to 3.6% in 2017. World GDP should grow 2.4% this year and 2.7% next, with growth slowing in developed countries and picking up in modestly developed ones.
Exports from developed and developing countries will grow at around the same rate this year, developed with 2.9% growth and developing with 2.8%. Imports of developed economies, however, will jump 3.3% in 2016 and just 1.8% in developing countries.
Asia will see the world’s fastest export growth at 3.4%, followed by North America and Europe, each with 3.1%.
“The sluggish growth that we are seeing today is atypical—but so were the high rates of growth we saw before the crisis,” Azevêdo said. “We should not be expecting a return to that kind of very high, atypical growth in the near future.”