Fed, refugees, China weigh on global trade: WTO

It’s not just China.

Trade growth is declining all over the globe, and the Fed and Europe’s refugee crisis are adding to the risks. The World Trade Organization  lowered its world trade growth estimate for the year on Wednesday to 2.8% from 3.3%. In 2014, world trade growth was 2.5%.

If that’s the way it actually pans out, then 2015 will be the fourth consecutive year trade growth came in below 3%. That’s half the average annual growth rate posted between 1990 and 2008.

The organization cautioned that its forecast could still be too high because of certain risks.

“These [risks] include a sharper-than-expected slowdown in emerging and developing economies, the possibility of destabilizing financial flows from an eventual interest rate rise by the US Federal Reserve, and unanticipated costs associated with the migration crisis in Europe,” the WTO said in a statement.

Falling demand in China and Brazil, combined with falling commodity prices already caused global trade to shrink in the first half of the year. This forced the WTO to cut  its 2015 growth projections. Asian imports are now expected to grow 2.6%, down from the previous forecast of 5.1%. The forecast for Asian exports fell to 3.1% from 5.0%.

For next year, the WTO revised its world trade growth forecast down to 3.9% from 4.0%. Still that revised forecast expects Asian imports to grow to 4.3% from 2.6% this year.

The WTO is often ridiculously optimistic on the world economy. This is best seen in its Latin America forecast.  It expects the region to post 5.7% import growth next year, after a 5.6% import contraction this year.

The WTO forecasts covered trade in goods, not services.



Categories: Asia Unhedged, China

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