São Paulo – The World Trade Organization (WTO) has downgraded its outlook for the growth in global trade for this year. According to forecasts shown this Thursday (27) by the organization, the growth in merchandise trade volume should be of 3.9% in 2018 and slow down to 3.7% in 2019. On the previous forecast, from April 12, the WTO was anticipating 4.4% growth for this year.
The organization points out that some of the risks identified in April have materialized, especially the announcement and adoption of trade restriction measures by large economies. The WTO is referring to the trade war between the United States and China, with the introduction of trade barriers between the two countries. The protectionist rhetoric permeates the speech of North American president Donald Trump, not only against China, but also against the country’s other trade partners.
To the WTO, these measures haven’t caused yet a deep impact in global trade, but they generate uncertainties and can have stronger negative effects in the near future, especially on the immediate reduction of investments in the production of merchandise for export.
In the same line, monetary policy tightening in developed countries have contributed for the volatility in exchange rates, which should continue to occur in the next few months. Brazil is an example of this, with a strong fluctuation of the dollar against the real, although, in this case, the country’s external position is not the sole cause for the volatility. October’s presidential election has been causing many uncertainties also.
“While trade growth remains strong, this downgrade [in the forecast for trade growth] 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,” said Brazilian Roberto Azevêdo, WTO Director General. “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,” he added.
According to the organization, the new global trade growth forecasts are based in estimates that show a growth of world Gross Domestic Product (GDP) of 3.1% in 2018, and of 2.9% in 2019.
Besides the trade war, the WTO mentions as risks for the growth of global trade the possibility of capital outflows from emerging countries due to the increase of interest rates in developed nations, geopolitical tensions and the behavior of the Chinese economy.
According to WTO, in H1 2018, global trade grew 3.8% over the same period of last year, with positive performances seen throughout all the geographical regions. However, North America exports had the sharpest growth, with Asia seeing the strongest import growth.
Translated by Sérgio Kakitani
