World trade seen growing 2.4% in 2017, uncertainty weighs: WTO
Geneva: Global trade of goods is forecast to grow at 2.4 % in volume terms in 2017 but could also slow to 1.8% if the “uncertainty” about overall macro-economic and trade policies persists across major industrialized nations, World Trade Organization economists said on Wednesday.
Faced with strong headwinds in the global economy arising from continued “unpredictable direction of the global economy” and “uncertainty,” the recovery of global trade will hinge on how rapidly the real GDP increases across the world, according to the press release issued by the WTO.
If the real GDP growth at market exchange rates is 2.7% in 2017 and 2.8% in the following year, then the prospects for global trade would improve modestly, the WTO suggested.
As compared to the tepid growth of 1.3% in global trade in volume terms last year, which stemmed from accumulation of several risks, the likely range of trade growth this year is going to hover around 1.8% to 3.6% in 2017, and 2.1% and 4% during 2018 subject to the magnitude of risks arising from uncertainty and unpredictable direction of the global economy, it maintained.
Global exports of goods in dollar terms were valued at $15.46 trillion last year, down 3.3% from the previous year of 2015.
“A spike in inflation leading to higher interest rates, tighter fiscal policies and imposition of measures to curtail trade could all undermine higher trade growth over the next two years,” the WTO cautioned.
Despite positive indications such as an increase in container throughput of major ports and a rise in a key index of world export orders, significant risks arising from “anti-globalization sentiment and the rise of populist political movements” could result in the proliferation of restrictive trade measures. “Narrowly targeted measures would probably not have an appreciable impact on world trade and output, but across the board measures or abandonment of existing trade agreements could damage consumer and business confidence and undermine international trade and environment,” the release suggested.
“Uncertainty” in any form- “negative” or “positive”- will impact the prospects for global trade, said Roberto Azevedo, the director general for the trade body. “Weak international trade growth in the last few years largely reflects continuing weakness in the global economy.”
Azevedo declined to comment on the impact of Trump administration’s trade policies which are veering towards pursing bilateral trade policies as opposed to multilateral trade initiatives. He said the Trump administration is yet to implement concrete policy steps on the trade front.
Without naming the US, the WTO release said somewhat obliquely: “if policymakers attempt to address job losses at home with several restrictions on imports, trade cannot help boost growth and may even constitute a drag on the recovery.”
Significantly, the 2008 financial crisis continue to generate aftershocks with the ratio of trade growth to GDP growth has fallen to 0.6:1 for the first time since 2001. Trade growth always remained high as compared to GDP growth until the 2008 crisis wrecked the world economy.
Countries in Asia and Europe made significant positive contributions to the global import demand in 2016, with Asian countries adding 1.9% percentage points (49% of the total increase) while Europe added 1.6 percentage points (39% of the total).
India, however, remains a bit player in both trade in goods and trade in commercial services as compared to China. While China notched a huge trade surplus to the tune of $511 billion in goods (exports of $2,098 billion minus imports of $1587 billion) last year, India registered a massive deficit of $95 billion ($264 billion of exports minus $359 billion of imports).
But, in commercial services, India registered a surplus of $28 billion ($161 billion of exports minus $133 of imports) as compared to China’s huge deficit of $242 billion ($207 billion of exports minus $449 billion).
Nevertheless, India faces significant headwinds in commercial services if the Trump administration implements its restrictive H1B visa policy and imposes other barriers on Indian software exports, according to trade analysts.