EghtesadOnline: World trade is on track to expand by 2.4% this year, though there is “deep uncertainty” about economic and policy developments, particularly in the United States, the World Trade Organization said on Wednesday.
The range for growth this year has been adjusted to between 1.8 and 3.6%, from 1.8 to 3.1% last September, it said, pointing to a risk that trade activity could be “stifled” due to lack of clarity about government policies, Reuters reported.
“We should see trade as part of the solution to economic difficulties, not part of the problem,” WTO director-general Roberto Azevedo said.
“Overall cautious optimism but trade growth remains fragile and there are considerable risks on the downside. Much of uncertainty is political,” he told a news conference. The world must “keep resisting the erection of new barriers to trade”, he said.
According to Financial Tribune, the WTO has repeatedly revised preliminary estimates over the past five years as predictions of economic recovery prove overly optimistic. Global trade grew by “an usually low” 1.3% in 2016, the slowest pace since the financial crisis, failing to match even its revised forecast of 1.7% of last September.
“The poor performance over the year was largely due to a significant slowdown in emerging markets where imports basically stagnated last year, barely growing in volume terms,” Azevedo said.
In 2018, global trade is forecast to grow by between 2.1% and 4% in WTO’s latest analysis. “A spike in inflation leading to higher interest rates, tighter fiscal policies and the imposition of measures to curtail trade could all undermine higher trade growth over the next two years,” it warned.
US President Donald Trump has made reducing US trade deficits a key focus of his economic agenda to try to grow American manufacturing jobs. He has taken particular aim at renegotiating trade relations with China and Mexico.
He is considering an executive order to launch a trade investigation that could lead to supplemental duties in certain product categories, a Trump administration official told Reuters on Monday.
“If policymakers attempt to address job losses at home with severe restrictions on imports, trade cannot help boost growth and may even constitute a drag on the recovery,” Azevedo said in a statement.
Azevedo declined to comment on the upcoming French election, but said: “Uncertainty has a freezing effect on investments and therefore on economic growth and output.
“Getting over the election cycles is important particularly in the major economies so we have a clear view of what is coming, what the policies are. Predictability is extremely important for investments and economic growth.”
IMF Sees Brighter Prospects
The global economy is gaining momentum with both rich and emerging economies seeing better growth prospects even as the “sword of protectionism” threatens to scupper growth, according to the head of the International Monetary Fund.
In a speech in Brussels previewing next week’s release of the IMF’s latest global growth forecasts, Christine Lagarde on Wednesday said the world’s economic recovery was strengthening.
A broad upswing in manufacturing activity in the US and other rich economies, stronger growth in developing economies and the benefits of higher commodity prices for low-income countries were all contributing to stronger global growth, the IMF’s managing director said.
“The good news is that, after six years of disappointing growth, the world economy is gaining momentum as a cyclical recovery holds out the promise of more jobs, higher incomes, and greater prosperity going forward,” Lagarde said.
But she made clear that doubts about the benefits of globalization and the international order ranked alongside the international impact of the Federal Reserve’s expected move to continue raising interest rates as potential threats to global growth.
“We also see—at least in some advanced economies—doubts about the benefits of economic integration, about the very “architecture” that has underpinned the world economy for more than seven decades,” she said.