WTO downgrades global trade outlook as risks mount

scalating trade tensions, tighter credit market conditions and economic policy uncertainty in important markets will slow trade growth for the rest of this year and in 2019, according to the World Trade Organization (WTO).

The multilateral trade body forecasts that world merchandise trade volume is forecast to grow 3.9 percent in 2018 from 4.7 percent in 2017, accompanied by global GDP growth of 3.1 percent at market exchange rates from 3 percent in 2017. While trade will continue to expand, but at more moderate pace to 3.7 percent in 2019 as global GDP growth dips to 2.9 percent.

The new forecast for 2018 is below the WTO's 12 April estimate of 4.4 percent but falls within the 3.1 percent to 5.5 percent growth range indicated at that time. Trade growth in 2018 is now most likely to fall within a range from 3.4 percent to 4.4 percent.

The updated trade forecast is based on expectations of world real GDP growth at market exchange rates of 3.1 percent in 2018 and 2.9 percent in 2019. This implies a ratio of trade growth to GDP growth of 1.3 in both years.

North America had the fastest export growth and Asia had the strongest import growth in the first half of 2018 while resource-based economies still struggled.

Exports growth in North America was seen to slow down to 5.5 percent this year from 6.7 percent in 2017 and further weakening to 4.9 percent in 2019 while imports growth was projected to grow a modest 4.3 percent in 2018 from 4 percent in 2017 but could taper to 3.6 percent in 2019.

In Asia, exports growth was expected to dip to 5.5 percent this year from 6.7 percent in 2017, before slowing down further to 4.9 percent in 2019. WTO also expects the region’s growth in import to slow down substantially from 9.8 percent in 2017 to 5.7 percent in 2018 and 4.9 percent in 2019.

Exports growth in developed economies was also seen to grow slower at 3.9 percent this year from 4.7 in 2017 and further down to 3.7 percent next year. Imports by these rich countries could still grow 3.2 percent in 2018 from 3 percent in 2017, but the pace of growth was seen to fall to 3 percent next year.

Meantime, growth in developing economies’ exports could slowdown to 4.6 percent in 2018 from 5.3 percent in 2017 to 4.5 percent in 2019. Growth in their imports was also projected to be slashed down to 4.8 percent this year from 8.1 percent in 2017 to 4.5 in 2019. WTO said the rising trade tensions pose the biggest risk to the forecast, but monetary policy tightening and associated financial volatility could also destabilize trade and output.

Trade-related indicators show a loss of momentum, including global export orders and economic policy uncertainty.

Some of the downside risks identified in April this year have since materialized, most notably a rise in actual and proposed trade measures targeting a variety of exports from large economies. The direct economic effects of these measures have been modest to date but the uncertainty they generate may already be having an impact through reduced investment spending. Monetary policy tightening in developed economies has also contributed to volatility in exchange rates and may continue to do so in the coming months.

WTO Director General Roberto Azevêdo said: “While trade growth remains strong, this downgrade reflects the heightened tensions that we are seeing between major trading partners. More than ever, it is critical for governments to work through their differences and show restraint.

The WTO will continue to support those efforts and ensure that trade remains a driver of better living standards, growth and job creation around the globe.”