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WTO lowers trade growth for 2018 and 2019 as risks accumulate

9/27/2018

New Delhi, Escalating trade tensions and tighter credit conditions in important markets will slow world trade for the rest of this year and in 2019, expect WTO economists. Trade will continue to expand but at a more moderate pace than previously forecast, they say, and anticipate growth in merchandise trade volume of 3.9 per cent in 2018, with trade expansion slowing further to 3.7 per cent in 2019. The new forecast for 2018 is below the WTO's April estimate of 4.4 per cent but falls within the 3.1 per cent to 5.5 per cent growth range indicated at that time. Trade growth in 2018 is now most likely to fall within a range from 3.4 per cent to 4.4 per cent. WTO Director General Roberto Azevêdo said the downgrade "reflects the heightened tensions that we are seeing between major trading partners." Some of the downside risks identified in April have since materialised, most notably a rise in actual and proposed trade measures targeting a variety of exports from large economies. The direct economic effects of these measures have been modest to date but the uncertainty they generate may already be having an impact through reduced investment spending. Monetary policy tightening in developed economies has also contributed to volatility in exchange rates and may continue to do so in the coming months. Trade policy measures are far from the only risk to the forecast. Developing and emerging economies could experience capital outflows and financial contagion as developed countries raise interest rates, with negative consequences for trade.Geopolitical tensions could threaten resource supplies and upset production networks in certain regions. Finally, structural factors such as the rebalancing of the Chinese economy away from investment and toward consumption are still present and could weigh on import demand due to the high import content of investment. Overall, risks to the forecast are considerable and heavily weighted to the downside. "More than ever, it is critical for governments to work through their differences and show restraint. The WTO will continue to support those efforts and ensure that trade remains a driver of better living standards, growth and job creation around the globe,” said Azevedo.

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