Sharp slump in global exports ends hopes of a significant pick up in global recoveryWednesday, September 28, 2016 > 09:35:54
(The Times of India)
Growth in volume of world trade in 2016 is now estimated to slump to the lowest level since the start of the global financial crisis in 2009. The World Trade Organisation (WTO) which has initially forecast in April that global trade volume in 2016 would grow by an estimated 2.8% has now lowered its estimates to 1.7%. Consequently the forecast for 2017 has also been lowered from 3.6% to anything from 1.8% to 3.1%. But what makes the current slowdown especially worrisome is that it comes soon after the spike in sentiments against globalisation and free trade.
The main reason for the sharp revision of trade figures was the poor performance in the first two quarters of the year when growth fell much below anticipated levels mainly because of the slower trade flows in China, Brazil and North America. Numbers in fact show that global imports have stagnated in the first half of 2016. Though a pick up is expected in the second half of the year the improvement is likely to be marginal. In fact the current trade trends also reinforces the view that links between global growth and trade has been significantly eroded in recent times.
An important reason for the lower than anticipated growth in global trade has been the sharp decline in imports of commodity exporting nations who have been badly hit by slump in prices and falling revenues. This is evident across nations in the South America, Africa, Middle East and countries of Eastern Europe. The impact of this was further intensified by the slowdown of imports into China which affected many Asian economies.
A bad news to most developing countries, including India, is that export growth in developed countries would be far ahead in developed countries with flows going up by 2.1% as compared to only 1.2% in developing countries. One reason for hope is the WTO forecast for 2017 which show that export growth for developed countries would be in the 1.7% to 2.9% range for developed countries and 1.8% to 3.1% in developing countries. But despite this a global recovery would continue to remain evasive until global trade picks up substantially once again.