WTO downgrades global trade forecast

WTO director- general Roberto Azevedo warned that policies that might curb globalisation would worsen the slowdown and impede job creation and economic growth.
WTO director- general Roberto Azevedo warned that policies that might curb globalisation would worsen the slowdown and impede job creation and economic growth.PHOTO: EUROPEAN PRESSPHOTO AGENCY

Revision comes as this year's trade growth declines to its slowest pace since 2009

GENEVA • The World Trade Organisation (WTO) yesterday revised down its 2016 global trade forecast by more than a percentage point, warning growth had hit its slowest pace since the global financial crisis.

The WTO now estimates that global trade will expand by just 1.7 per cent in 2016, compared with its April projection of 2.8 per cent, and compared with a projection a year ago that trade would swell by 3.9 per cent this year.

The United Nations agency also revised down its forecast for next year, with trade now expected to grow between 1.8 and 3.1 per cent, down from the previously anticipated 3.6 per cent.

"With expected global GDP (gross domestic product) growth of 2.2 per cent in 2016, this year would mark the slowest pace of trade and output growth since the financial crisis of 2009," WTO said in a statement.

It said the downgrade followed a sharper-than-expected decline in merchandise trade volumes in the first quarter, and a smaller-than-expected rebound in the second quarter. The contraction, it said, was driven especially by slowing economic and trade growth in developing economies like China and Brazil.

SOUNDING THE ALERT

The dramatic slowing of trade growth is serious and should serve as a wake-up call.

WTO DIRECTOR-GENERAL ROBERTO AZEVEDO

But North America, which had showed the strongest import growth of any region between 2014 and 2015, was also hit by deceleration, WTO said. "The dramatic slowing of trade growth is serious and should serve as a wake-up call," WTO director-general Roberto Azevedo warned in the statement.

He voiced particular concern over the slowdown in the context of growing anti-globalisation sentiment. "We need to make sure that this does not translate into misguided policies that could make the situation much worse, not only from the perspective of trade, but also for job creation and economic growth and development which are so closely linked to an open trading system," he said.

Mr Azevedo cautioned against the negative impact of inequality. "While the benefits of trade are clear, it is also clear that they need to be shared more widely," he insisted. "This is a moment to heed the lessons of history and recommit to openness in trade, which can help to spur economic growth."

Earlier this month, the Organisation for Economic Cooperation and Development (OECD) had also trimmed its global growth forecasts by 0.1 point for this year to 2.9 per cent, down from its last estimates in June, saying the collapse in trade growth suggests that globalisation may be stalling and is contributing to a stagnation in world economic output.

The volume of world trade declined in the first quarter and will fall short of overall output growth in the full year, it said in a report.

With global growth seen picking up to only 3.2 per cent next year - trimmed from 3.3 per cent in June - OECD chief economist Catherine Mann warned that that would be too little to generate the jobs that youth expected and to respect pension promises to the elderly.

AGENCE FRANCE-PRESSE, REUTERS

A version of this article appeared in the print edition of The Straits Times on September 28, 2016, with the headline 'WTO downgrades global trade forecast'. Print Edition | Subscribe