Global trade recovery threatened by downside risks: WTO

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By 2017-09-26

By Kamal Kandewatta

Though the World Trade Organization (WTO) upgraded forecast of global trade for the second half of 2017, the prevailing risk factors can easily undermine the positive outlook, noted WTO Director General, Roberto Azevêdo.
In a recent press release WTO Director General, Roberto Azevêdo stated "The improved outlook for trade is welcome news but substantial risks that threaten the world economy remain in place and could easily undermine any trade recovery".
According to him these risks include the possibility of protectionist trade restrictive actions, a worrying rise in global geopolitical tensions and rising economic toll from natural disasters.

Azevêdo has also asserted "Though difficult to quantify, these risks are very real. As a result, increased optimism about trade should be tempered with a healthy dose of caution".

However, following the sharp acceleration in global trade in the first half of the year, WTO economists have issued an upward revision to their......forecast for 2017 trade expansion. Revising the previous estimates for growth in world merchandise trade, WTO has raised the growth figure to 3.6% which is a 1.0% upward adjustment to the previously estimated figure.
The revision was mainly accompanied by modest improvement in the global GDP and sound economic performance of leading economies.

The global GDP has recorded a growth of 2.8% (2017) at market exchange rates compare to 2.3% in last year. Major economies including United States of America (USA), European Union (EU) and China has performed well during the first half of the year. According to data USA, EU and Chinese economies have seen an accelerated growth in the second quarter than the first quarter in this year.

For example in China quarter-on-quarter growth rose from 1.3% in first quarter to 1.7% in quarter two.
Due to this upward movement both exports and imports have taken an upward trend. In USA, exports and imports were up 4.9% and 3.9% year-on-year during this period, while in Europe exports grew at around 2.6% and imports rose from 1.2%.
However, other regions mainly Africa and the Middle East saw flat growth of 0.1% in exports due to the unstable demand for oil and other natural resources.

However, according to WTO the rapid pace of trade growth in 2017 is unlikely to be sustained in the next year. Other than the factors noted earlier, tight monetary policies in developed countries to deal with rising interest rates in USA, possibility of the EU Central Bank phasing out quantitative easing measures and expectation on reined fiscal expansion and easy credit in China to prevent the economy from overheating would have a negative impact on the global GDP and trade.
Considering these factors, trade growth in 2018 is expected to be around 3.2% WTO estimates indicates.



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