WTO Forecasts Fall of 1.6% in 2014 Trade

New Rate Pegged at 3.1%, 2015 Forecast Cut to 4.0%

WTO economists have reduced their forecast for world trade growth in 2014 to 3.1% (down from the 4.7% forecast made in April) and cut their estimate for 2015 to 4.0% from 5.3% previously.

The downgrade comes in response to weaker-than-expected GDP growth and muted import demand in the first half of 2014, particularly in natural resource exporting regions such as South and Central America.

“In light of this, the WTO’s forecasts for trade growth have also been revised downwards for 2014 and 2015. Uneven growth and continuing geopolitical tensions will remain a risk for both trade and output in the second half of the year.

When the last forecast was released in April 2014, conditions for stronger trade growth appeared to be falling into place after a two year slump that saw world merchandise trade grow just 2.2% on average during 2012–13, roughly equal to the rate of growth of world gross domestic product (GDP). Leading indicators at the time pointed to an upturn in developed economies and Europe in particular.

Although growth has strengthened somewhat in 2014, it has remained unsteady. Output fell in the first quarter in the United States (–2.1%, annualized rates) and in the second quarter in Germany (–0.6%), sapping global import demand. China’s GDP growth also slowed from 7.7% in 2013 to 6.1% in the first quarter of 2014 before rebounding in the second. The slow first quarter contributed to weak exports in trading partners.

Tensions between the European Union and the United States on the one hand and the Russian Federation on the other over Ukraine have already resulted in trade sanctions on certain agricultural commodities, and the number of products affected could widen if the crisis persists. Conflict in the Middle East is also stoking uncertainty, and could lead to a spike in oil prices if the security of oil supplies is threatened. Finally, an outbreak of Ebola haemorrhagic fever in West Africa has proven difficult to contain, and any spread of the disease could trigger a broader panic with major economic implications for West Africa, and perhaps even beyond the region.

Asia recorded the fastest export growth of any region in the first half of 2014, with a 4.2% rise over the same period last year. It was followed by North America (3.3%), Europe (1.2%), South and Central America(–0.8%), and Other regions (–2.0%). North America led all regions on the import sidewith growth of 3.0%, followed by Asia (2.1%), Europe (1.9%), Other regions (“0.4) and South America (–3.4%).

Table 1: World merchandise trade and GDP, 2010-2015 a

Annual % change

	2010	2011	2012	2013	2014P	2015P
Volume of world merchandise trade	13.9	5.4	2.3	2.2	3.1	4.0
Exports
Developed economies	13.4	5.2	1.1	1.5	2.5	3.8
Developing economies	15.0	5.5	4.1	3.9	4.0	4.5
North America	15.0	6.6	4.4	2.8	3.7	3.9
South and Central America	4.7	6.8	0.7	1.4	0.4	3.2
Europe	11.6	5.6	0.8	1.5	2.3	3.5
Asia	22.6	6.4	2.8	4.7	5.0	4.8
Other regions ^b	6.0	1.9	4.2	0.6	-0.1	4.2
Imports
Developed economies	10.9	3.4	0.0	-0.3	3.4	3.7
Developing economies	18.2	7.7	5.4	5.3	2.6	4.5
North America	15.7	4.4	3.1	1.2	3.9	4.2
South and Central America	22.4	13.0	2.3	3.1	-0.7	4.8
Europe	9.8	3.2	-1.8	-0.5	2.5	3.5
Asia	18.1	6.6	3.7	4.5	4.0	4.3
Other regions ^b	11.4	8.3	10.1	3.3	1.3	3.5
Real GDP at market exchange rates (2005)	4.1	2.8	2.2	2.3	2.6	3.1
Developed economies	2.6	1.4	1.1	1.3	1.8	2.2
Developing economies	7.5	5.8	4.6	4.4	4.3	4.9
North America	2.7	1.8	2.3	2.1	2.1	3.1
South and Central America	6.1	4.5	2.5	3.2	1.2	2.4
Europe	2.2	2.0	-0.2	0.3	1.4	1.7
Asia	7.2	4.2	4.2	4.2	4.6	4.5
Other regions ^b	5.2	4.0	4.2	2.8	2.9	3.9

^a Figures for 2014 and 2015 are projections.

^b Other regions comprise the Africa, Commonwealth of Independent States and Middle East.

Sources: WTO Secretariat for trade, consensus estimates for GDP.

On the export side, the WTO anticipates a 2.5% increase in shipments from developed economies in 2014, followed by a 3.8% rise in 2015. Meanwhile, exports of developing economies are expected to grow by 4.0% in 2014 and 4.5% in 2015. Imports of developed economies are forecast to rise 3.4% this year and 3.7% next year, while those of developing economies increase 2.6% in 2014 and 4.5% in 2015.

Perhaps the most noteworthy aspect of Table 1 is the prediction of weak or even negative trade growth in South and Central America and Others regions (i.e. Africa, CIS and Middle East) in 2014. 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. Another notable point is the fact that North America’s import demand held up relatively well despite the GDP slowdown in the first quarter (Q1).

NATURAL RESOURCES TRADE

(Non-seasonally adjusted volume indices, 2010Q1=100)

Source: WTO Secretariat.

Finally, nominal merchandise trade statistics in current dollar terms may provide a better indication of current trade trends than statistics in volume terms since the former are generally timelier. These are shown in Chart 4 for selected major traders through July or August depending on data availability. In the chart we observe that year-on-year growth in exports and imports remained positive in the United States in July (+5% and +4%, respectively), as it did in the European Union (+4% and +7% for total trade). Meanwhile, although China’s exports were up 9% in August, the country’s imports fell 2%. Overall, the trade figures in dollar terms appear to be holding steady and showing modest growth.

Merchandise exports and imports, July 2012-July 2014

(Year-on-year percentage change in current dollar values)

a January and February averaged to minimize distortions due to lunar new year.

Source: IMF International Financial Statistics, Global Trade Information Services GTA database, national statistics.