Daily Management Review

WTO Downwardly Revised Its Global Trade Forecast For 2015


10/01/2015


Global trade for 2015 has been downwardly revised by WTO from its earlier 3.3% to its current 2.8%. A major component of this revision can be attributed to the rapid cooling of the Chinese economy, low prices of oil and commodities as well as falling demand from Brazil.



As per the World Trade Organisation, global trade is set to grow by 2.8%. A hike in U.S. interest rates is likely to peg it back further. Other areas of concern includes the rapid slowdown of the Chinese economy as well the burgeoning refugee crisis in Europe.

The WTO forecast, has been downwardly revised from its April 3.3%, to its current 2.8%, which goes to show that for 4 years in a row the rate of global trade has been less than 3%, which is half of the annual average of the period between ranging from 1990 to 2008, before the world was hit by the financial crisis.

Although, the WTO's forecast implies that global trade is set to grow from its 2.5% rate in 2014, however, forecasts by WTO have mostly tended to be overly optimistic, giving way to receding hopes of global economic recovery.

"These include a sharper-than-expected slowdown in emerging and developing economies, the possibility of destabilizing financial flows from an eventual interest rate rise by the US Federal Reserve, and unanticipated costs associated with the migration crisis in Europe," said a spokesman from WTO in a statement.

The rapid cooling of the Chinese economy which has had widespread repercussions have already caused the WTO to cut the 2015 growth forecast in Asian economies. This includes a downsizing of its earlier forecast of Asian imports from their earlier 5.1% to their more modest 2.6%. Asian exports too have been recast from the earlier 5forecast of 5.0% to their more moderate 3.1%.

Falling demand from China has naturally been a major factor for the massive shrinking of global trade in the first two quarters of 2015. The low prices of crude oil and commodity prices have also had a big impact on global trade.

However, year-on-year global growth for the year to date is still positive, at 2.3 percent from the same period of 2014.

As per a WTO forecast, in the next fiscal year, world trade is set to grow by 3.9%, which is a slight revision from its previous 4.0%.

The rebound in global trade is predicated on the bouncing back of Asian imports from their 2.6% in 2015 to 4.3% in 2016. Trade in Latin America is also expected to grow from its current 5.6% to 5.7% in 2016.

Of note is the fact that the WTO forecasts have taken into account only goods which have been globally traded. Global trade in services has not figured in their forecasts.








References: www.reuters.com 







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