World trade in goods is estimated to grow 3.6 per cent in 2017 compared with the 1.6 per cent increase in 2016, according to the revised estimates circulated by the World Trade Organisation (WTO) on Thursday.
Growth in global trade for 2017 was earlier projected at 2.4 per cent by WTO, which has now attributed the improved outlook to a resurgence of Asian trade flows. “This was mainly due to intra-regional shipments picking up and a recovery in import demand in North America,” an official release said.
However, the rapid pace of trade growth in 2017 is unlikely to be sustained next year for a number of reasons and the increase could be at a more moderate 3.2 per cent, the forecast cautioned.
“The improved outlook for trade is welcome news, but substantial risks that threaten the world economy remain in place and could easily undermine any trade recovery,” WTO Director-General Roberto Azevêdo said.
“These risks include the possibility that protectionist rhetoric translates into trade restrictive actions, a worrying rise in global geopolitical tensions and a rising economic toll from natural disasters.”
Moderation in 2018 The reasons for a likely moderation of growth in trade in 2018 are manifold. “First, trade growth in 2018 will not be measured against a weak base year, as is the case this year. Second, monetary policy is expected to tighten in developed countries as the Federal Reserve gradually raises interest rates in the US and the European Central Bank looks to phase out quantitative easing in the Euro area,” the forecast report pointed out.
Another reason for a likely slowing down of growth next year is that the fiscal expansion and easy credit in China are likely to be reined in to prevent the economy from overheating.
The new estimate for world trade growth in 2017 is at the high end of the range of estimates provided in WTO economists’ most recent trade forecast of April 12, 2017 (1.8 per cent - 3.6 per cent). The strength of the revision is partly due to a modest improvement in the consensus forecast for world GDP growth (2.8 per cent in 2017 at market exchange rates, up from 2.3 per cent in 2016) and partly due to the composition of that growth.