Forecasts for world trade growth in 2014 and 2015 have been lowered by the World Trade Organization (WTO) as it noted uneven growth among economies and geopolitical threats to global economic expansion.
WTO economists reduced their expectations for 2014 from 4.7 percent in April to 3.1 percent, and cut their estimate for 2015 to 4 percent from 5.3 percent previously.
“The downgrade comes in response to weaker-than-expected GDP growth and muted import demand in the first half of 2014,” it said. “Beyond this specific downward revision, risks to the forecast remain predominantly on the downside, as global growth remains uneven and as geopolitical tensions and risks have risen.”
“International institutions have significantly revised their GDP forecasts after disappointing economic growth in the first half of the year,” said WTO director-general Roberto Azevêdo.
As a result, WTO’s forecasts for trade growth have also been revised downwards for 2014 and 2015. “Uneven growth and continuing geopolitical tensions will remain a risk for both trade and output in the second half of the year,” said Azevêdo.
When the April 2014 forecast was made, conditions for stronger trade growth appeared to be falling into place after a two-year slump that saw world merchandise trade grow just 2.2 percent on average during 2012-2013. Leading indicators at the time pointed to an upturn in developed economies and Europe in particular.
Although growth has strengthened somewhat in 2014, it has remained unsteady. WTO noted the fall in output in the first quarter in the United States and in the second quarter in Germany. China’s GDP growth also slowed in 2013 in the first quarter of 2014 before rebounding in the second.
In light of this, global trade stagnated in the first half of 2014, as the gradual recovery of import demand in developed countries was offset by declines in developing countries, it added.
Export-import predictions
Growth in trade and output is expected to be somewhat stronger in the second half of 2014 as governments and central banks may provide policy support to boost growth, and as idiosyncratic factors that weighted on trade in the first half (e.g., harsh winter weather in the United States, a sales tax rise in Japan, etc.) begin to fade. However, several risk factors on the horizon have the potential to produce worse economic outcomes, said the organization.
These include tensions between the European Union and the United States as well as in the Russian Federation over Ukraine that have already resulted in trade sanctions on certain agricultural commodities, the conflict in the Middle East that could lead to a spike in oil prices, and the Ebola outbreak in West Africa that could trigger panic in the region and beyond, leading to major economic implications.
“The presence of several such low-probability/high-cost risk factors has made the trade forecast particularly difficult to gauge this year,” said WTO.
World trade, as measured by the average of exports and imports, only increased 1.8 percent in the first half of 2014 compared to the same period in 2013. But WTO expects growth for the year to be higher as imports of developed economies continue to rise, and as imports rebound in developing countries following a dip in the second quarter.
These developments should boost shipments from trading partners in both developed and developing countries. Import demand of developed economies actually outpaced that of developing economies in the first half of the year. Meanwhile, developed economies’ exports were up 1.6 percent year-on-year in the first six months of 2014 while those of developing economies rose 2.1 percent.
Asia recorded the fastest export growth of any region in the first half of 2014, with a 4.2 percent rise over the same period last year. It was followed by North America (3.3 percent), Europe (1.2 percent), South and Central America (–0.8 percent), and other regions (–2 percent).
North America led all regions on the import side with growth of 3 percent, followed by Asia (2.1 percent), Europe (1.9 percent), other regions (−0.4 percent), and South America (–3.4 percent).
On the export side, the WTO anticipates a 2.5 percent increase in shipments from developed economies in 2014, followed by a 3.8 percent rise in 2015. Meanwhile, exports of developing economies are expected to grow by 4 percent in 2014 and 4.5 percent in 2015.
Imports of developed economies are forecast to rise 3.4 percent this year and 3.7 percent next year, while those of developing economies to increase 2.6 percent in 2014 and 4.5 percent in 2015.
Azevêdo pointed out that trade can play a positive role in economic growth through “cutting trade costs and broadening trade opportunities” to reverse the downward trend.
Photo: Garitzko
