WTO Raises Trade Growth Forecasts for 2014, 2015
World trade is expected to grow this year by 4.7 percent, WTO economists announced this week, exceeding earlier predictions for 2014. While these numbers show a noticeable improvement over the past two years, they still lag well below the 20-year average for trade growth.
The 4.7 percent prediction is higher than the 4.5 percent that the global trade body had previously suggested for this year. For 2015, trade growth is slated to be even higher - at 5.3 percent growth, matching the historical average for 1983-2013.
However, the positive uptick in trade flows could be put at risk by geopolitical tensions, the WTO warned. "Civil conflicts and territorial disputes in the Middle East, Asia, and Eastern Europe could provoke higher energy prices and disrupt trade flows if they escalate," the report said, while noting that these types of risks are "inherently unpredictable."
Developed economies are becoming increasingly stable; however, developing economies still face some downside risks, the WTO said, highlighting large current account deficits in India and Turkey, together with the currency problems being faced by Argentina.
Another area to watch was the potential for monetary policy in developed economies to become less accommodative, making volatility "likely to be a defining feature of 2014." (For more on potential changes to monetary policy, see related story, this issue)
Volatility already played a role last year in affecting developing economy growth, with many of these countries feeling the impact of developed economies beginning to taper off their quantitative easing programmes, such as in the case of the US Federal Reserve slowing down its rate of asset purchases.
2013 growth "subdued"
Looking retrospectively, world merchandise trade rose by 2.1 percent in volume in 2013, just below the 2.3 percent increase seen in 2012. These numbers were slightly lower than what WTO economists had predicted late last year, when they downgraded their estimates for 2013 from 3.3 percent to 2.5 percent. (See Bridges Weekly, 26 September 2013)
This week's report placed the cause of this divergence as "a stronger than expected decline in developing economies' trade flows in the second half of last year."
The report also found that trade growth is not keeping pace with that of the global economy - the second year running where this has failed to occur.
Traditionally, world trade tends to grow at twice the rate of global GDP, WTO economists noted. Over the past two years, growth in global merchandise trade has averaged only 2.2 percent.
Push for Doha
The 159-member body concluded a deal on trade facilitation last December, which some economists predict could add US$1 trillion to the global economy once it enters into force. WTO members are now examining ways to restart - and eventually resolve - the Doha Round of trade talks, which have long been stalled.
"Concluding the Doha Round would provide a strong foundation for trade in the future, and a powerful stimulus in today's growth environment," WTO Director-General Roberto Azevêdo said in Geneva on Monday. "We are currently discussing new ideas and new approaches which would help us to get the job done - and to do it quickly."
WTO members have been instructed by their ministers to develop by year's end a Doha Round "work programme" that would essentially outline how to address the outstanding issues of the 13-year trade talks. The consultations on this subject so far are still in the early stages, sources say; given that the last major developments in the talks were in 2008, members have been debating what to use as the basis for future discussions. (See Bridges Weekly, 10 April 2014)
"It's clear that trade is going to improve as the world economy improves," Azevêdo said. "But I know that just waiting for an automatic increase in trade will not be enough for WTO members. We can actively support trade growth by updating the rules and reaching new trade agreements."