Global Trade Growth Forecast Downgraded Amid Slowing Demand, Geopolitical Tensions
World Trade Organization economists have downgraded their forecast for world trade growth in 2014 and 2015 amid uneven economic growth and continuing geopolitical tensions, according to a Sept. 23 WTO press release. World merchandise trade is now estimated to increase by 3.1 percent this year, down from the 4.7 percent projected in April, and by 4 percent in 2015, down from 5.3 percent. Trade grew by less than 2.5 percent in 2013, which the WTO linked to a substantial increase in new trade restrictions.
The WTO says its downward revisions are due to the slower than expected growth of global trade in the first half of 2014 (1.8 percent) as the gradual recovery of import demand in developed countries (up 2.6 percent) was offset by a near stagnation in developing countries (up 0.5 percent). Growth is expected to be somewhat stronger in the second half of the year as governments and central banks may provide policy support to boost growth and as factors that slowed trade in the first half (e.g., harsh winter weather in the U.S. and a sales tax rise in Japan) begin to fade.
However, the WTO adds, several risk factors on the horizon have the potential to produce worse economic outcomes: the possibility of worsening economic relations between the U.S. and the European Union, on the one hand, and Russia, on the other, over the situation in Ukraine; a spike in oil prices if the security of oil supplies in the Middle East is threatened; and any spread of the Ebola hemorrhagic fever outbreak beyond West Africa, which “could trigger a broader panic with major economic implications.”
Particularly noteworthy, the WTO points out, is the prediction of weak or even negative trade growth this year in South and Central America, Africa, the Middle East and the former Soviet Union. Economies in these regions have been negatively affected by a combination of civil conflict, weak non-fuel commodity prices, and the easing of growth in previously buoyant trading partners in Asia.