WTO cuts trade forecasts after trade shrinks in first half of 2015

A cargo ship waits to be loaded with shipping containers at a port in Qingdao, Shandong province, China, on Sept 1, 2015.
A cargo ship waits to be loaded with shipping containers at a port in Qingdao, Shandong province, China, on Sept 1, 2015.PHOTO: REUTERS

GENEVA (REUTERS) - World trade will grow by 2.8 per cent this year and could be pegged back further by a U.S. interest rate rise, China's economic slowdown or Europe's refugee crisis, the World Trade Organisation said yesterday Wednesday.

The forecast, revised down from a 3.3 per cent forecast made in April, means 2015 will be the fourth year in a row with trade growth of less than 3 per cent, half the annual average in 1990-2008 before the financial crisis hit.

The WTO's forecast implies growth will quicken this year, from 2.5 per cent growth in 2014. But its expectations have repeatedly proved overly optimistic as hopes of global economic recovery have receded.

There were still big potential risks to its latest numbers.

"These include a sharper-than-expected slowdown in emerging and developing economies, the possibility of destabilising financial flows from an eventual interest rate rise by the US Federal Reserve, and unanticipated costs associated with the migration crisis in Europe," the WTO said in a statement.

The Chinese slowdown already caused the WTO to cut its 2015 forecast for growth in Asian imports to 2.6 per cent, down from a 5.1 per cent projection in April, and Asian exports to 3.1 per cent from the previous 5.0 per cent forecast.

China's falling demand was one major reason why global trade shrank in the first two quarters of 2015, contracting from the previous quarter by an average of 0.7 per cent. Falling demand in Brazil and oil and commodity prices also contributed.

However, year-on-year global growth for the year to date is still positive, at 2.3 per cent from the same period of 2014.

In 2016, world trade is expected to grow by 3.9 per cent, a revision of the WTO's previous forecast of 4.0 per cent.

That rebound is predicated on Asian import growth bouncing back from 2.6 per cent in 2015 to 4.3 per cent, as well as Latin America flipping from a 5.6 per cent import contraction this year to 5.7 per cent import growth in 2016.

The WTO forecasts covered trade in goods, but not trade in services.