OECD: ‘International Trade in Freefall’
World trade is in free fall and is likely to drop by 13.2 percent in 2009, according to an interim report released by the Organization for Economic Co-operation and Development on Tuesday just two days before a summit of leaders from the world’s 20 largest economies.
“The world economy is in the midst of its deepest and most synchronised recession in our lifetimes, caused by a global financial crisis and deepened by a collapse in world trade,” said Klaus Schmidt-Hebbel, the OECD’s chief economist, in an editorial that accompanied the report.
The extent of the decline underlines the challenges facing world leaders meeting at the G20 summit in London on Thursday. Measures to combat a rise in trade protectionism are expected figure prominently on the agenda.
In its latest set of forecasts for global economic growth, the OECD outbid the WTO’s already dark estimate of a 9-percent fall in world trade flows (see Bridges Weekly, 25 March 2009, ).
“After steady annual growth at around 8 percent over the past half decade, world trade growth started to weaken in early 2008 and collapsed in the last quarter,” it said.
“This contraction of world trade is broad-based, and affects all regions and is the worst since comparable data exist.”
The report suggests the impacts of the recession will be substantial on all countries. The OECD expects a 4.3 percent fall in gross domestic product across the organisation’s 30 rich-country members, as growing unemployment undermines demand for consumer goods.
The jobless rate will rise sharply in all OECD countries and will peak in 2010 or early 2011, the report said. By next year, the number of unemployed in the G7 countries will be almost double what it was in mid-2007.
To stop the ongoing “economic haemorrhaging,” world leaders should develop a coherent strategy to tackle problems in the financial markets, boost stimulus spending, and reform the financial system, Schmidt-Hebbel said.