Lower oil prices push down WTO’s trade growth prospects

The World Trade Organisation (WTO) has cut its global trade growth forecast for 2015 from 3.3 per cent to 2.8 per cent amid falling import demand in China, Brazil and other emerging economies, falling oil and commodity prices and significant exchange rate fluctuations.

WTO Economists have lowered their forecast for world trade growth in 2015 to 2.8 per cent, from the 3.3 per cent forecast made in April, and reduced their estimate for 2016 to 3.9 per cent from 4.0 per cent.

These revision, according to WTO in a statement, reflect a number of factors that weighed on the global economy in the first half of 2015, including falling import demand in China, Brazil and other emerging economies; falling prices for oil and other primary commodities; and significant exchange rate fluctuations.

Volatility in financial markets, uncertainty over the changing stance of monetary policy in the United States and mixed recent economic data, WTO said, have clouded the outlook for the world economy and trade in the second half of the year and beyond.

According to the world trade body, if current projections are realised, 2015 will mark the fourth consecutive year in which annual trade growth has fallen below three per cent and the fourth year where trade has grown at roughly the same rate as world GDP, rather than twice as fast, as was the case in the 1990s and early 2000s.

“Trade can act as a catalyst for economic growth. At a time of great uncertainty, increased trade could help reinvigorate the global economy and lift prospects for development and poverty alleviation. WTO members can help to set trade growth on a more robust trajectory by seizing the initiative on a number of fronts, notably by negotiating concrete outcomes by our December Ministerial Conference in Nairobi,” Director-General Roberto Azevêdo said.

It stated: “Global output is still expanding at a moderate pace but risks to the world economy are increasingly on the downside.  These include a sharper-than-expected slowdown in emerging and developing economies, the possibility of destabilizing financial flows from an eventual interest rate rise by the US Federal Reserve, and unanticipated costs associated with the migration crisis in Europe.
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At the time of our last forecast in April 2015, world trade and output appeared to be strengthening based on available data through 2014 fourth quarter. However, results for the first half of 2015 were below expectations as quarterly growth turned negative, averaging -0.7 per cent in first and second quarter. Recent trade developments are illustrated in Chart 1, which shows seasonally-adjusted, quarterly merchandise trade indices in volume terms (i.e. adjusted to account for fluctuations in prices and exchange rates) by level of development.1  Despite the quarterly declines in the first half of 2015, year-on-year growth in trade for the year to date remains positive at 2.3 per cent”.

It disclosed that trade growth remains uneven across countries and regions. “ After a long period of stagnation, Europe recorded the fastest year-on-year export growth of any region in second quarter at 2.7 per cent, followed by North America (2.1 per cent), Asia (0.6 per cent), South and Central America (0.4 per cent) and Other Regions (-1.0 per cent, including Africa, the Commonwealth of Independent States and the Middle East).  Disparities between regional growth rates was stronger on the import side than on the export side, with positive growth of 6.5 per cent in North America, 3.1 per cent in Asia and 1.6 per cent in Europe, and declines of 2.3 per cent in South and Central America and 3.1 per cent in Other Regions”.