Trade growth to slow down again in 2012, says WTO | WPN World People News

Global trade growth is forecast to slow down for the second consecutive year to 3.7 per cent in 2012, which is below the last 20 years average including the period of the trade collapse when it was 5.5 per cent, World Trade Organization forecast Thursday.

Should the forecast come to pass, the baseline forecast for 2012 and 2013 would not bring the volume of world trade any closer to its pre-crisis trend.

In fact, the gap should grow larger as long as the rate of trade expansion continues to fall short of earlier levels, the WTO has cautioned in its annual report.

"More than three years have passed since the trade collapse of 2008-09, but the world economy and trade remain fragile. The further slowing of trade expected in 2012 shows that the downside risks remain high. We are not yet out of the woods," WTO Director General Pascal Lamy said.

Global trade growth slowed to 5.0 per cent in 2011 as against the provisional forecast of 5.8 per cent issued in September and 13.8 per cent growth in 2010. In 2013 however, there is expectations of the global trade growth rebounding to 5.6 per cent.

"The sluggish pace of recovery raises concerns that a steady trickle of restrictive trade measures could gradually undermine the benefits of trade openness," said Lamy.

The trade forecast assumes global output growth of 2.1 per cent in 2012 at market exchange rates, down from 2.4 per cent in 2011, based on a consensus of economic forecasters.

There are however severe downside risks for growth that could have even greater negative consequences for trade if they came to pass. These include a steeper than expected downturn in Europe, financial contagion related to the sovereign debt crisis, rapidly rising oil prices, and geopolitical risks.

Given the volatility in financial and commodities market, trade outlook for 2012 was largely dependent on the fortunes of the world's top two trading powers - European and the US economies.

"Which of these two developments will exert greater influence on global demand this year will in large part determine the course of trade in 2012," Lamy told a news conference here.

Recent production data suggest that the European Union may already be in recession, and even China's dynamic economy appears to be growing more slowly in 2012.

Economic prospects have improved in the United States and Japan as labour market conditions improve in the former and business orders pick up in the latter, but these positives will only partly make up for the earlier negatives.

The 2012 forecast includes a slump in exports of goods from developed countries to 2.0 per cent from 4.7 per cent in 2011. Conversely exports from developing countries are expected to improve slightly to 5.6 per cent from 5.4 per cent in 2011.

In 2011, developed economies exceeded expectations with export growth of 4.7 per cent, while developing economies (in which the Commonwealth of Independent States, or CIS have been included for the analysis) did worse than expected, recording an increase of just 5.4 per cent.

The relatively strong performance of developed economies was driven by a robust 7.2 per cent increase in exports from the US, as well as a 5.0 per cent expansion in exports from the European Union. Meanwhile, Japan's 0.5 per cent drop in exports detracted from the average for developed economies overall.

Several adverse developments disproportionately affected developing economies, including the interruption of oil supplies from Libya that caused African exports to tumble 8 per cent last year, and the severe flooding that hit Thailand in the fourth quarter.

The Japanese earthquake and tsunami also disrupted global supply chains, which penalized exports from developing countries like China, as reduced shipments of components hindered production of goods for export.

Significant exchange rate fluctuations occurred during the year, which shifted the competitive positions of some major traders and prompted policy responses.

In 2011, the dollar value of world merchandise trade advanced 19 per cent to $18.2 trillion, surpassing the previous peak of $16.1 trillion from 2008. Much of the growth was due to higher commodity prices, but monthly trade flows were mostly flat or declining in many major traders over the course of the year.

The share of developing economies and the CIS in the world total also rose to 47 per cent on the export side and 42 per cent on the import side, the highest levels ever recorded in a data series extending back to 1948.

The value of world commercial services exports also increased by 11 per cent in 2011 to $4.2 trillion, with strong differences in annual growth rates for particular countries and regions.

Source: Europe News.Net