Modest trade recovery to continue in 2015-16: WTO

Growth in the volume of world merchandise trade will pick up only slightly over the next two years, rising from 2.8 per cent in 2014 to 3.3 per cent in 2015 and eventually to 4.0 per cent in 2016, WTO economists have announced. Director-General Roberto Azevêdo said that ´by withdrawing protectionist measures, improving market access, avoiding policies which distort competition and striving to agree reforms to global trade rules, governments can boost trade and seize the opportunities that it offers for everyone.´

Trade expansion will therefore remain well below the annual average of 5.1 per cent posted since 1990. The modest gains in 2014, marked the third consecutive year in which trade grew less than 3 per cent. Trade growth averaged just 2.4 per cent between 2012 and 2014, the slowest rate on record for a three year period when trade was expanding (i.e. excluding years like 1975 and 2009 when world trade actually declined).

In the short-term at least, trade expansion will no longer far outstrip overall economic growth as had been the general pattern for decades. The 2.8 per cent rise in world trade in 2014 barely exceeded the increase in world GDP for the year, and forecasts for trade growth in 2015 and 2016 only surpass expected output growth by a small margin.

Several factors contributed to the sluggishness of trade and output in 2014 and at the start of 2015, including slowing GDP growth in emerging economies, an uneven recovery in developed countries, and rising geopolitical tensions, among others. Strong exchange rate fluctuations, including a 14 per cent appreciation of the US dollar against other currencies between July and March, have further complicated the trade situation and outlook. Collapsing world oil prices in 2014 (down 47 per cent between 15 July and 31 December) and weakness in other commodity classes hit export receipts and reduced import demand in exporting countries, but also boosted real incomes and imports in importing countries. Prices have continued to fall since then, suggesting excess supply, insufficient demand, or both. Whether this turns out to be a positive or a negative development on balance for world trade in 2015 remains to be seen.

Recent surveys of business sentiment and activity point to a firming of the economic recovery in the European Union, moderating growth in the United States, and subdued activity in some emerging economies, particularly Brazil and Russia. These indicators are consistent with the current trade forecast, but WTO economists cautioned that the presence of several risk factors added to the uncertainty of their estimates.