The World Trade Organization (WTO) downgraded its forecast for world trade expansion to 2.5 percent from 3.7 percent, and scaled back its 2013 estimate to 4.5 percent from 5.6 percent as a result of slowing global output growth.
The WTO lowered its forecast made in April after global trade growth slipped to a crawl in the second quarter of 2012, based on new quarterly merchandise trade volume statistics compiled by the organization. It cited the sluggish economic activity in the U.S., China’s declining exports, and the European sovereign debt crisis as contributory factors to the easing of global trade growth.
The volume of world trade as measured by the average of exports and imports only managed to grow 0.3 percent in the second quarter compared to the first, or 1.2 percent at an annualized rate, the organization said in a press statement.
The WTO now expects world merchandise trade volume to grow by 2.5 percent in 2012. On the export side, it anticipates a 1.5 percent increase in developed economies’ trade (down from 2 percent in April) and a 3.5 percent expansion for developing countries (down from 5.6 percent).
On the import side, it foresees nearly stagnant growth of 0.4 percent in developed economies (down sharply from 1.9 percent in April) and a more robust 5.4 percent increase in developing countries (down from 6.2 percent).
The WTO expects trade growth to rebound to 4.5 percent in 2013. Exports of developed and developing economies should increase by 3.3 percent and 5.7 percent, respectively, while imports of developed and developing countries should advance 3.4 percent and 6.1 percent.
Risks to the forecast will remain mostly on the downside as long as financial uncertainty in Europe remains elevated. Other events could also intrude to produce worse outcomes for trade, including a “hard landing” for the Chinese economy or geopolitical tensions, the WTO said.
However, there is also some upside potential if the European Central Bank’s recently announced bond purchasing program has an immediate salutary effect on EU import demand, it added.
Photo: David McKelvey
