The World Trade Organization released a report on Sept. 27 stating the escalating trade tensions and tighter credit market conditions in important markets will slow trade growth for the rest of 2018 and into 2019.
Trade will continue to expand but at a more moderate pace than previously forecast, read the report, the WTO anticipates growth in merchandise trade volume of 3.9% in 2018, with trade expansion slowing further to 3.7% in 2019. The new forecast for 2018 is below the WTO’s April 12 estimate of 4.4%, but falls within the 3.1% to 5.5% growth range indicated at that time. Trade growth in 2018 is now most likely to fall within a range from 3.4% to 4.4%.
Some of the risks identified in April have since materialized, most notably a rise in actual and proposed trade measures targeting a variety of exports from large economies, which have reduced investment spending.
The WTO also reports monetary policy tightening in developed economies has also contributed to volatility in exchange rates and may continue to do so in the coming months.
“While trade growth remains strong, this downgrade reflects the heightened tensions that we are seeing between major trading partners. More than ever, it is critical for governments to work through their differences and show restraint. The WTO will continue to support those efforts and ensure that trade remains a driver of better living standards, growth and job creation around the globe,” said WTO director general Roberto Azevedo.
The updated trade forecast is based on expectations of world real GDP growth at market exchange rates of 3.1% in 2018 and 2.9% in 2019. This implies a ratio of trade growth to GDP growth of 1.3 in both years.