Slowing global output growth has led World Trade Organization (WTO) economists to downgrade their 2012 forecast for world trade expansion to 2.5 per cent from 3.7 per cent and to scale back their 2013 estimate to 4.5 per cent from 5.6 per cent, the WTO said on September 21 2012.
“In an increasingly interdependent world, economic shocks in one region can quickly spread to others. Recently announced measures to reinforce the euro and boost growth in the United States are therefore extremely welcome,” WTO Director-General Pascal Lamy said.
“But more needs to be done. We need a renewed commitment to revitalise the multilateral trading system which can restore economic certainty at a time when it is badly needed. The last thing the world economy needs right now is the threat of rising protectionism,” he said.
The global economy has encountered increasingly strong headwinds since the last WTO Secretariat forecast was issued in April. Output and employment data in the United States have continued to disappoint, while purchasing managers’ indices and industrial production figures in China point to slower growth in the world’s largest exporter.
More importantly, the European sovereign debt crisis has not abated, making fiscal adjustment in the peripheral euro area economies more painful and stoking volatility. Figures for world trade include trade between EU countries (i.e. EU intra-trade), making them highly sensitive to developments in this region.
All of these factors have contributed to an easing of global trade growth, which slowed to a crawl in the second quarter according to new quarterly merchandise trade volume statistics compiled by the WTO .
The volume of world trade as measured by the average of exports and imports only managed to grow 0.3 per cent in the second quarter compared to the first, or 1.2 per cent at an annualised rate.
The trade slowdown in the first half of 2012 was driven by an even stronger deceleration in imports of developed countries and by a corresponding weakness in the exports of developing economies, which for the purposes of this analysis includes the Commonwealth of Independent States, the WTO said.
The WTO now expects world merchandise trade volume to grow by 2.5 per cent in 2012 (down from 3.7 per cent in April). On the export side, the WTO anticipates a 1.5 per cent increase in developed economies’ trade (down from two per cent) and a 3.5 per cent expansion for developing countries (down from 5.6 per cent). On the import side, the WTO foresees nearly stagnant growth of 0.4 per cent in developed economies (down sharply from 1.9 per cent) and a more robust 5.4 per cent increase in developing countries (down from 6.2 per cent).
(Photo of WTO Director-General Pascal Lamy: European Parliament)