WTO Lowers Trade Forecast as Tensions Unsettle Global Economy

3 October 2019 – Escalating trade tensions and a slowing global economy have led WTO economists to sharply downgrade their forecasts for trade growth in 2019 and 2020.

World merchandise trade volumes are now expected to rise by only 1.2% in 2019, substantially slower than the 2.6% growth forecast in April. The projected increase in 2020 is now 2.7%, down from 3.0% previously. The economists caution that downside risks remain high and that the 2020 projection depends on a return to more 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,” said WTO director-general Roberto Azevêdo. “Job creation may also be hampered as firms employ fewer workers to produce goods and services for export.

Risks to the forecast are heavily weighted to the downside and dominated by trade policy. Further rounds of tariffs and retaliation could produce a destructive cycle of recrimination. Shifting monetary and fiscal policies could destabilise 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. Source (F&T Weekly) https://bit.ly/2oHJsTs