World trade will slow down still further to 3.7 percent in 2012 after expanding by 5 percent in 2011, a sharp deceleration from the 2010 rebound of 13.8 percent, the World Trade Organization (WTO) projects.
The global economic slowdown can be attributed to a loss of momentum due to a number of shocks, including the European sovereign debt crisis, the WTO said in an April 12 press release.
A significant braking of trade expansion was forecast for 2011, but multiple economic setbacks during the year dampened growth beyond expectations and led to a stronger-than-anticipated easing in the fourth quarter, the WTO added.
“More than three years have passed since the trade collapse of 2008-09, but the world economy and trade remain fragile. The further slowing of trade expected in 2012 shows that the downside risks remain high. We are not yet out of the woods,” Pascal Lamy, WTO director general, said.
The “severe downside risks” for growth include a steeper-than-expected downturn in Europe, financial crisis related to the sovereign debt crisis, rapidly rising oil prices, and geopolitical risks, the organization warned.
Recent production data suggest that the European Union may already be in recession, and even China’s dynamic economy appears to be growing more slowly in 2012.
Economic prospects have improved in the United States and Japan as labor market conditions improve in the former and business orders pick up in the latter, but these positives will only partly make up for the earlier negatives.
Developed economies exceeded expectations with export growth of 4.7 percent in 2011, while developing economies (including the Commonwealth of Independent States, or CIS) did worse than expected, recording an increase of just 5.4 percent.
In fact, shipments from developing economies other than China grew at slightly slower pace than exports from the developed economies that included disaster-struck Japan, the WTO noted.
“The relatively strong performance of developed economies was driven by a robust 7.2 percent increase in exports from the United States, as well as a 5 percent expansion in exports from the European Union. Meanwhile, Japan’s 0.5 percent drop in exports detracted from the average for developed economies overall.”
Several adverse developments disproportionately affected developing economies, including the interruption of oil supplies from Libya that caused African exports to tumble 8 percent last year, and the severe flooding that hit Thailand in the fourth quarter.
The Japanese earthquake and tsunami also disrupted global supply chains, which penalized exports from developing countries like China, as reduced shipments of components hindered production of goods for export.
Lamy warned: “The WTO has so far deterred economic nationalism, but the sluggish pace of recovery raises concerns that a steady trickle of restrictive trade measures could gradually undermine the benefits of trade openness. It is time to do no harm.”
For 2013, WTO economists foresee an economic growth of 5.6 percent—assuming there will be a more stabilized economic environment and a slowdown in oil price hikes—even as they warn that all their forecasts were “difficult to gauge due to the extraordinary levels of volatility in financial markets and in the broader economy.”
Photo: EvelynGiggles
