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Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.


WTO cuts global trade growth forecast to 2.8%

Monday, April 11, 2016 > 10:55:20

(Busienss Standard)

World trade would then grow below three per cent for a fifth year. However, WTO forecast a 3.6 per cent rise for 2017

In what could further depress Indian exports, the World Trade Organization (WTO) on Thursday cut its earlier forecast for growth in 2016 to 2.8 per cent, from the previous one of 3.9 per cent.

World trade would then grow below three per cent for a fifth year. However, forecast a 3.6 per cent rise for 2017.

A slowing Chinese economy, worsening financial market volatility and rising exposure of countries with large foreign debts is primarily blamed for the sluggish growth, as last year.

The Geneva-based body, a multilateral regulator for trade, predicted gross domestic product (GDP) growth in developed economies, especially the US and the European Union, will ease - mainly due to poor business and consumer confidence. Volatility in trade will also be a factor for the financial instability looming over Asian countries.

"While the volume of global trade is growing, its value has fallen because of shifting exchange rates and a fall in commodity prices. This could undermine fragile economic growth in vulnerable developing countries," said WTO director-general Roberto Azevêdo.

Exports from developed countries are expected to grow at 2.9 per cent, and in developing countries at 2.8 per cent. This growth in volume runs the risk of further pushing down global prices if the crash in commodity prices continues, coupled with the large scale dumping of cheaper Chinese inventory in the international market.

India, for instance, has had 15 months of falling merchandise exports; the government revised its cumulative export target for 2015-16 from the earlier $300 billion to $260 billion. Commerce Minister said on Wednesday that while merchandise exports had not fallen in volume, lower returns were the culprit.

Asia is expected to record the fastest export growth of any region at 3.4 per cent, followed by North America and Europe, each at 3.1 per cent.

Meanwhile, growth in imports of developed economies are expected to outpace those of developing countries in 2016, with a 3.3 per cent rise in the former compared to a 1.8 per cent increase in the latter. As a result, while developing nations might find it easier to rein in their fiscal deficits, the more complicated challenge of boosting domestic demand can be a headache.

Region wise, WTO said North America should see its imports increase by 4.1 per cent in 2016, while Asian and European imports should both register growth of 3.2 per cent.

More accommodative monetary policy from the European Central Bank could spur growth in the euro area and boost demand for goods and services, WTO suggested. "There remains as well the threat of creeping protectionism as many governments continue to apply trade restrictions and the stock of these barriers continues to grow."

In 2015, the imports of developed economies surged, growing 4.5 per cent by volume. While those of developing countries stagnated far behind, with only 0.2 per cent growth. However, WTO noted developed economies witnessed 2.6 per cent volume growth in export as compared to 3.3 per cent growth in developing ones.

Alternative indicators of economic and trade activity in the opening months of 2016 are mixed, with some pointing to a firming of trade and output growth while others suggest some slowing. The trade body said data suggests container throughput at major ports had recovered much of the trade lost to the slowdown last year, while automobile sales have continued to grow at a healthy pace in developed countries.

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