WTO slashes trade growth as tensions unsettle global economy
The downgrade reversal is a sequel to what the group’s renowned economists linked to the escalating trade tensions in the global economy.
Accordingly, WTO said world merchandise trade volumes are now expected to rise by only 1.2 per cent in 2019, substantially slower than the 2.6 per cent growth forecast in April.
The projected increase in 2020 is now 2.7 per cent, down from 3.0 per cent previously. The economists warned that the risks remain high and that the 2020 projection depends on a return to more normal trade relations.
Speaking on the development, the Director-General WTO, Roberto Azevêdo, said the darkening outlook for trade is discouraging, but not unexpected stressing that beyond their direct effects, trade conflicts heighten uncertainty, which is leading some businesses to delay the productivity-enhancing investments essential to raising living standards.
“Job creation may also be hampered as firms employ fewer workers to produce goods and services for export. Resolving trade disagreements would allow WTO members to avoid such costs. The multilateral trading system remains the most important global forum for settling differences and providing solutions for the challenges of the 21st Century global economy. Members should work together in a spirit of cooperation to reform the WTO and make it even stronger and more effective,” he said.
The WTO latest trade forecast is based on consensus estimates of world GDP growth of 2.3per cent at market exchange rates for both 2019 and 2020, down from 2.6per cent previously. Slowing economic growth is partly due to rising trade tensions but also reflects country-specific cyclical and structural factors, including the shifting monetary policy stance in developed economies and Brexit-related uncertainty in the European Union. Macroeconomic risks are firmly tilted to the downside.
Due to the high degree of uncertainty associated with trade forecasts under current conditions, the estimated growth rate for world trade in 2019 is placed within a range of 0.5 per cent to 1.6 per cent.
WTO restated that trade growth could fall below this range if trade tensions continue to build, or outperform it if they start to recede. The range of likely values is wider for 2020, ranging from 1.7per cent to 3.7per cent, with better outcomes depending on the easing of trade tensions.
It further said risks to the forecast are heavily weighted to the downside and dominated by trade policy while further rounds of tariffs and retaliation could produce a destructive cycle of recrimination.
“Shifting monetary and fiscal policies could destabilize volatile financial markets. A sharper slowing of the global economy could produce an even bigger downturn in trade. A disorderly Brexit could have a significant regional impact, mostly confined to Europe”, WTO stated.
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