Slowing global output growth has
led WTO economists to downgrade their 2012 forecast for world trade expansion
to 2.5 per cent from 3.7 per cent and to scale back their 2013 estimate to 4.5
per cent from 5.6 per cent.
“In an increasingly interdependent world, economic shocks in one region can quickly spread to others. Recently announced measures to reinforce the euro and boost growth in the United States are therefore extremely welcome,” said WTO director-general Pascal Lamy.
“In an increasingly interdependent world, economic shocks in one region can quickly spread to others. Recently announced measures to reinforce the euro and boost growth in the US are therefore extremely welcome,” he said, adding, but more needs to be done. "We need a renewed commitment to revitalise the multilateral trading system which can restore economic certainty at a time when it is badly needed. The last thing the world economy needs right now is the threat of rising protectionism,” he said.
The global economy has encountered increasingly strong headwinds since the last WTO Secretariat forecast was issued in April. Output and employment data in the United States have continued to disappoint, while purchasing managers’ indices and industrial production figures in China point to slower growth in the world’s largest exporter.
More importantly, the European sovereign debt crisis has not abated, making fiscal adjustment in the peripheral euro area economies more painful and stoking volatility. Figures for world trade include trade between EU countries (i.e. EU intra-trade), making them highly sensitive to developments in this region.
All of these factors have contributed to an easing of global trade growth, which slowed to a crawl in the second quarter according to new quarterly merchandise trade volume statistics compiled by the WTO
The volume of world trade as measured by the average of exports and imports only managed to grow 0.3 per cent in the second quarter compared to the first, or 1.2per cent at an annualised rate.
The trade slowdown in the first half of 2012 was driven by an even stronger deceleration in imports of developed countries and by a corresponding weakness in the exports of developing economies, which for the purposes of this analysis includes the Commonwealth of Independent States .
The WTO now expects world merchandise trade volume to grow by 2.5per cent in 2012 (down from 3.7 per cent in April). On the export side, we anticipate a 1.5per cent increase in developed economies’ trade (down from two per cent) and a 3.5per cent expansion for developing countries (down from 5.6per cent). On the import side, we foresee nearly stagnant growth of 0.4per cent in developed economies (down sharply from 1.9per cent) and a more robust 5.4per cent increase in developing countries (down from 6.2per cent).
Figures for 2013 are provisional estimates based on strong assumptions about medium-term economic developments, including: that current policy measures will be sufficient to avert a breakup of the euro, and an agreement will be reached to stabilize public finances in the United States, thereby avoiding automatic spending cuts and tax increases early next year.
Failure of these and other assumptions could derail the latest projections.
As a result, these figures should be interpreted with caution. Based on current information, the WTO expects trade growth to rebound to 4.5 per cent in 2013. Exports of developed and developing economies should increase by 3.3per cent and 5.7per cent, respectively, while imports of developed and developing countries should advance 3.4 per cent and 6.1 per cent.
Although developed countries collectively recorded modest increases in both exports and importsin2012, some grew faster than others.
Exports of the United States and shipments from the EU to the rest of the world (i.e. extra-EU exports) grew steadily over the past year, with year-on-year increases of around seven per cent and five per cent, respectively, in the second quarter.
Japanese exports have been mostly flat since mid-2010, but even they recorded an 8.5 per cent year-on-year increase in the second quarter. Imports of the United States and Japan have also held up relatively well despite the crisis, with year-on-year growth of roughly five per cent and six per cent in the latest period.
However, import demand in the European Union has weakened significantly, resulting in less trade between EU countries (intra-trade down by 3.5 per cent year-on-year in the second quarter) and fewer imports from the rest of the world (also down by 3.5 per cent). The weight of the EU in total world trade (around 35 per cent on both the export and import sides in 2011, including EU-intra trade), combined with the larger-than-expected year-on-year drop in EU imports through the first half of 2012, explains much of the downward revision to the forecast. The EU also represents nearly 60 per cent of developed economies’ imports, which accounts for the stagnation in projected imports of developed economies in 2012.
Weak import demand in developed countries and softer domestic demand in China have contributed to sagging trade flows in the developing world, most noticeably in dynamic export-oriented economies in Asia.
Export growth in Chine dropped to 2.9 per cent and import growth fell to 2.8 per cent in the first quarter of 2012 before rebounding slightly in the second quarter, but available monthly data suggest that the third quarter results may be weaker still.
Those economies that have already reported figures for August show either stagnation like China) or decline like Brazil, Japan, Singapore, which suggests that that the recent weakness of trade will persist into the third quarter.
Risks to the forecast will remain mostly on the downside as long as financial uncertainty in Europe remains elevated. Other events could also intrude to produce worse outcomes for trade, including a “hard landing” for the Chinese economy or geopolitical tensions. However, there is also some upside potential if the European Central Bank’s recently announced bond purchasing program has an immediate salutary effect on EU import demand.
In this case we might see slightly faster growth in the fourth quarter and for 2012 as a whole, but possibly less growth in 2013 as the reversion to recent trends would be weaker. The growth of world trade observed in the first half of 2012 is less than what traditional econometric models would predict given current rates of growth in gross domestic product (GDP).
This also occurred during the trade collapse of 2008–09 that accompanied the global financial crisis and may be related to issues such as access to trade finance or, in the case of the sovereign debt crisis, the re-introduction of exchange rate risk into peripheral euro area economies.
“In an increasingly interdependent world, economic shocks in one region can quickly spread to others. Recently announced measures to reinforce the euro and boost growth in the United States are therefore extremely welcome,” said WTO director-general Pascal Lamy.
“In an increasingly interdependent world, economic shocks in one region can quickly spread to others. Recently announced measures to reinforce the euro and boost growth in the US are therefore extremely welcome,” he said, adding, but more needs to be done. "We need a renewed commitment to revitalise the multilateral trading system which can restore economic certainty at a time when it is badly needed. The last thing the world economy needs right now is the threat of rising protectionism,” he said.
The global economy has encountered increasingly strong headwinds since the last WTO Secretariat forecast was issued in April. Output and employment data in the United States have continued to disappoint, while purchasing managers’ indices and industrial production figures in China point to slower growth in the world’s largest exporter.
More importantly, the European sovereign debt crisis has not abated, making fiscal adjustment in the peripheral euro area economies more painful and stoking volatility. Figures for world trade include trade between EU countries (i.e. EU intra-trade), making them highly sensitive to developments in this region.
All of these factors have contributed to an easing of global trade growth, which slowed to a crawl in the second quarter according to new quarterly merchandise trade volume statistics compiled by the WTO
The volume of world trade as measured by the average of exports and imports only managed to grow 0.3 per cent in the second quarter compared to the first, or 1.2per cent at an annualised rate.
The trade slowdown in the first half of 2012 was driven by an even stronger deceleration in imports of developed countries and by a corresponding weakness in the exports of developing economies, which for the purposes of this analysis includes the Commonwealth of Independent States .
The WTO now expects world merchandise trade volume to grow by 2.5per cent in 2012 (down from 3.7 per cent in April). On the export side, we anticipate a 1.5per cent increase in developed economies’ trade (down from two per cent) and a 3.5per cent expansion for developing countries (down from 5.6per cent). On the import side, we foresee nearly stagnant growth of 0.4per cent in developed economies (down sharply from 1.9per cent) and a more robust 5.4per cent increase in developing countries (down from 6.2per cent).
Figures for 2013 are provisional estimates based on strong assumptions about medium-term economic developments, including: that current policy measures will be sufficient to avert a breakup of the euro, and an agreement will be reached to stabilize public finances in the United States, thereby avoiding automatic spending cuts and tax increases early next year.
Failure of these and other assumptions could derail the latest projections.
As a result, these figures should be interpreted with caution. Based on current information, the WTO expects trade growth to rebound to 4.5 per cent in 2013. Exports of developed and developing economies should increase by 3.3per cent and 5.7per cent, respectively, while imports of developed and developing countries should advance 3.4 per cent and 6.1 per cent.
Although developed countries collectively recorded modest increases in both exports and importsin2012, some grew faster than others.
Exports of the United States and shipments from the EU to the rest of the world (i.e. extra-EU exports) grew steadily over the past year, with year-on-year increases of around seven per cent and five per cent, respectively, in the second quarter.
Japanese exports have been mostly flat since mid-2010, but even they recorded an 8.5 per cent year-on-year increase in the second quarter. Imports of the United States and Japan have also held up relatively well despite the crisis, with year-on-year growth of roughly five per cent and six per cent in the latest period.
However, import demand in the European Union has weakened significantly, resulting in less trade between EU countries (intra-trade down by 3.5 per cent year-on-year in the second quarter) and fewer imports from the rest of the world (also down by 3.5 per cent). The weight of the EU in total world trade (around 35 per cent on both the export and import sides in 2011, including EU-intra trade), combined with the larger-than-expected year-on-year drop in EU imports through the first half of 2012, explains much of the downward revision to the forecast. The EU also represents nearly 60 per cent of developed economies’ imports, which accounts for the stagnation in projected imports of developed economies in 2012.
Weak import demand in developed countries and softer domestic demand in China have contributed to sagging trade flows in the developing world, most noticeably in dynamic export-oriented economies in Asia.
Export growth in Chine dropped to 2.9 per cent and import growth fell to 2.8 per cent in the first quarter of 2012 before rebounding slightly in the second quarter, but available monthly data suggest that the third quarter results may be weaker still.
Those economies that have already reported figures for August show either stagnation like China) or decline like Brazil, Japan, Singapore, which suggests that that the recent weakness of trade will persist into the third quarter.
Risks to the forecast will remain mostly on the downside as long as financial uncertainty in Europe remains elevated. Other events could also intrude to produce worse outcomes for trade, including a “hard landing” for the Chinese economy or geopolitical tensions. However, there is also some upside potential if the European Central Bank’s recently announced bond purchasing program has an immediate salutary effect on EU import demand.
In this case we might see slightly faster growth in the fourth quarter and for 2012 as a whole, but possibly less growth in 2013 as the reversion to recent trends would be weaker. The growth of world trade observed in the first half of 2012 is less than what traditional econometric models would predict given current rates of growth in gross domestic product (GDP).
This also occurred during the trade collapse of 2008–09 that accompanied the global financial crisis and may be related to issues such as access to trade finance or, in the case of the sovereign debt crisis, the re-introduction of exchange rate risk into peripheral euro area economies.
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