JAKARTA (TheInsiderStories) – The World Trade Organization (WTO) has cut its growth forecast for global trade by 1.2 percent in 2019, versus its earlier estimate of 2.6 percent in April, said the latest report on Tuesday (10/01). For 2020, the growth is seen to 2.7 percent, down from an earlier forecast of 3.0 percent.
Escalating the trade tensions and a slowing global economy have led the organization economists downgraded their forecasts for trade growth in 2019 and 2020. WTO caution that downside risks remain high in this year and the 2020 projection depends on a return of normal trade relations.
“The darkening outlook for trade is discouraging but not unexpected. Beyond their direct effects, trade conflicts heighten uncertainty, which is leading some businesses to delay the productivity-enhancing investments that are essential to raising living standards,” WTO Director-General Roberto Azevedo said in an official statement.
Azevedo added that job creation could also be impacted as global firms may be forced to employ fewer workers needed to produce goods and services for exports.
The updated trade forecast is based on consensus estimates of world GDP growth of 2.3 percent at market exchange rates for both 2019 and 2020, down from 2.6 percent previously, said the report.
The WTO’s lowered forecast reflects slower global economic growth due to Brexit related uncertainty in the European Union, shifting monetary policy stance in developed economies, and rising trade tensions. Macroeconomic risks are firmly tilted to the downside.
The Geneva-based organization also gave an estimated growth rate of 0.5 percent to 1.6 percent for world trade growth this year.
“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 1.7 percent to 3.7 percent, with better outcomes depending on an easing of trade tensions,” the WTO said.
“Further rounds of tariffs and retaliation could produce a destructive cycle of recrimination,” the organization added.
The WTO added that North America recorded the fastest import growth of any single region at 1.8 percent, followed by Europe at 0.2 percent. The two regions that witnessed declines included South America, down 0.7 percent, and Asia, lower by 0.4 percent.
“Collectively, the imports of other regions grew faster than those of North America, at 2.4 percent. Import demand has been particularly weak in Asia, weighing heavily on exporters of manufactured goods such as Japan, Korea, and Germany,” the statement said.
The United States (US) and China have been caught in a 15-month trade war, with both nations imposing tariffs on hundreds of billions of dollars of each other’s goods. Reportedly, China’ top trade negotiator, however, is expected to lead an upcoming 13th round of talks sometime this month with hopes to resolve the trade war with the US.
“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. Finally, a disorderly Brexit could have a significant regional impact, mostly confined to Europe,” WTO ended.
Written by Lexy Nantu, Email: firstname.lastname@example.org