WTO Down
Grades Growth in Trade in 3.9% in 2018 from 4.4%
·
World merchandise trade volume is
forecast to grow 3.9% in 2018, accompanied by global GDP
growth of 3.1% at market exchange rates.
·
Trade volume growth should slow to 3.7% in
2019 as global GDP growth dips to 2.9%.
·
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.
·
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.
Escalating trade
tensions and tighter credit market conditions in important markets will slow
trade growth for the rest of this year and in 2019, WTO economists expect.
Trade will continue
to expand but at a more moderate pace than previously forecast. The WTO
anticipates growth in merchandise trade volume of 3.9% in 2018, with trade
expansion slowing further to 3.7% in 2019. The new forecast for 2018 is below
the WTO's 12 April estimate of 4.4% but falls within the 3.1% to 5.5% growth
range indicated at that time. Trade growth in 2018 is now most likely to fall
within a range from 3.4% to 4.4% (Table 1).
Some of the downside
risks identified in the April press release 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.”
The updated trade
forecast is based on expectations of world real GDP growth at market exchange
rates of 3.1% in 2018 and 2.9% in 2019. This implies a ratio of trade growth to
GDP growth of 1.3 in both years.
Trade
policy measures are far from the only risk to the forecast. Developing and
emerging economies could experience capital outflows and financial contagion as
developed countries raise interest rates, with negative consequences for trade.
Geopolitical tensions could threaten resource supplies and upset production
networks in certain regions. Finally, structural factors such as the
rebalancing of the Chinese economy away from investment and toward consumption
are still present and could weigh on import demand due to the high import content
of investment. Overall, risks to the forecast are considerable and heavily
weighted to the downside.
Charts 1 and 2 show
seasonally-adjusted export and import volumes broken down by level of
development and geographic region. In the first half of 2018, world merchandise
trade was up 3.8% compared to the same period in the previous year. Exports of
developed economies rose 3.5% during the same period while shipments from
developing economies increased by 3.6%. On the import side, developed economies
recorded year-on-year growth of 3.5% in the first half of 2018 while developing
countries registered an increase of 4.9%. Imports of developed economies have
generally been flat in 2018 while exports of developing economies plateaued
similarly.
All
geographical regions recorded positive year-on-year trade growth in both
exports and imports in the first half of 2018, but some regions performed
better than others. North America saw the fastest export growth during this
period at 4.8%, followed by Asia at 4.2% and Europe at 2.8%. Exports of Other
regions (comprising Africa, the Middle East and the Commonwealth of Independent
States including associate and former member States) increased by 2.7% while
those of South America were up 1.1%. Asia had the fastest import growth (6.1%)
followed by South America (5.5%), North America (4.8%), Europe (2.9%) and Other regions (0.5%).
Prices
of energy commodities including oil have risen 33% for the year-to-date through
August compared to last year, boosting export revenues of commodity exporters.
This has not yet translated into strong import demand in resource-rich regions,
as one might expect. Meanwhile the US dollar has appreciated by 8.4% in real
effective terms since January of 2018.
The
downward revision to the trade forecast is consistent with the WTO's World
Trade Outlook Indicator (WTOI), which has signalled
slowing trade momentum since the first quarter of 2018. The WTOI combines
several leading indicators for trade into a single composite indicator.
Components include container port throughput, air freight shipments, export
orders, automobile sales and trade in electronic components and raw materials.
The export orders component, derived from purchasing mangers' indices, has
fallen from 54.1 in January to 50.3 in August, just above the baseline value of
50.0 separating expansion from contraction.