Economists Downwardly Revised Their World Trade Growth Estimate for 2015 to 4 Percent

Economists at the World Trade Organization (WTO) have downwardly revised their world trade growth estimate for 2015 to 4 percent from the previous estimate of 5.3 percent.

For 2014 also, the WTO has reduced its world trade growth forecast to 3.1 percent from the 4.7 percent forecast made in April this year.

The downgrade is 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, the trade body said.

“Beyond this specific downward revision, risks to the forecast remain predominantly on the downside, as global growth remains uneven and as geopolitical tensions and risks have risen,” the WTO statement said.

In its latest forecast, WTO said it expects world trade growth to pick up in 2015 to 4 percent from the 2014 forecast of 3.1 percent. However, it would still be below the 1993-2013 average of 5.2 percent.

Among the factors affecting trade are weakening import demand in resource rich regions and China, stagnation in Europe, and risks in the form of health crises (Ebola) as well as geopolitical tensions and regional conflicts.

In the United States, trade growth is slow but steady with 2.8 percent on the export side and 3.5 percent on the import side for the year to date.

Imports of the EU finally recovered their level of mid-2011 in the latest quarter after rising 2.7 percent since the first quarter of 2013.

Imports of Developing economies and CIS stalled in the first half of 2014, rising just 0.5 percent for the year to date compared to 4.7 percent in 2013.

“This is a moment to remind ourselves that trade can play a positive role here. Cutting trade costs and broadening trade opportunities can be a key ingredient to reversing this trend,” said Director-General Roberto Azevêdo.

Compared to the first half, growth in trade and output is expected to be somewhat stronger in the second half of 2014 as governments and central banks may provide policy support to boost growth, and as idiosyncratic factors that weighted on trade in the first half (e.g. harsh winter weather in the US, a sales tax rise in Japan, etc.) begin to fade.

However, several risk factors on the horizon have the potential to produce worse economic outcomes. These include tension over Ukraine, conflict in the Middle East, and outbreak of Ebola haemorrhagic fever in West Africa—all low probability/high cost risk factors which make trade forecast particularly difficult, the WTO said.