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World Trade Growth to Remain Stagnant in 2016, WTO Projects

Monday, April 11, 2016
Sandler, Travis & Rosenberg Trade Report

World Trade Organization economists have lowered their forecasts for world merchandise trade growth in 2016 to 2.8 percent, down from 3.9 percent last fall. If this projection is realized, 2016 will mark the fifth consecutive year in which annual trade growth has fallen below three per cent and roughly matched the growth rate of world GDP rather than doubling it as was the case in the 1990s and early 2000s. However, the WTO said that while this long, uninterrupted spell of slow trade growth is unprecedented, its importance should not be exaggerated.

According to the WTO, trade growth may remain volatile in 2016 due to a number of downside risks, including a sharper than expected slowing of the Chinese economy, worsening financial market volatility, the continued application of trade restrictions, and the exposure of countries with large foreign debts to sharp exchange rate movements. However, there are some positive indicators; e.g., container throughput at major ports has recovered much of the ground lost to the trade slowdown of 2015 and automobile sales have continued to grow at a healthy pace in developed countries.

The WTO also reported its final trade growth figures for 2015, stating that merchandise trade volumes rose 2.8 percent but their dollar value plummeted 13 percent to $16.5 trillion. According to the WTO, this discrepancy was mostly attributable to strong fluctuations in commodity prices and exchange rates, which were in turn driven by slowing economic growth in China, resilient fuel production in the United States and divergent monetary policies across leading economies. Volatility in financial markets also dented business and consumer confidence and may have contributed to reduced global demand for certain durable goods.

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