The World Trade Organization has slashed its forecast for world trade growth in 2014 to 3.1%, citing weaker-than-expected gross domestic product growth and muted import demand in the first half of the year.
In April, the WTO forecast growth of 4.7%. But in a news release issued Tuesday, it said global trade had stagnated during the first half of the year “as the gradual recovery of import demand in developed countries was offset by declines in developing countries,” particularly in natural resource exporting regions such as South America and Central America.
Imports into South and Central America are expected to fall by 0.7% this year as economies are hit by a combination of civil conflict, weak non-fuel commodity prices and the easing of growth in Asian export markets, the WTO said.
Growth in world trade and output is expected to be somewhat stronger in the second half of 2014 as governments and central banks provide policy support to boost growth, the WTO said, but “several risk factors on the horizon have the potential to produce worse economic outcomes.”
These include the tensions over Ukraine, which have already resulted in trade sanctions on certain agricultural commodities. The number of affected products could widen if the crisis persists, the WTO warned.
In addition, the conflict in the Middle East is “stoking uncertainty” and could fuel a spike in oil prices, and any further spread of the Ebola outbreak in West Africa “could trigger a broader panic with major economic implications for West Africa, and perhaps even beyond the region.”
“The presence of several such low probability/high cost risk factors has made the trade forecast particularly difficult to gauge this year,” the WTO added.
The organization also predicted Tuesday that trade was likely to grow 4.0% in 2015, far below the 20-year average of 5.2%. The forecast in April was for growth of 5.3%.
At the time of the previous forecast, the WTO noted, conditions for stronger trade growth appeared to be falling into place after a two-year slump that saw trade grow just 2.2% on average during 2012 to 2013. “Leading indicators at the time pointed to an upturn in developed economies and Europe in particular,” it said.