World trade is expected to grow by a modest 4.7% in 2014 and at a slightly faster rate of 5.3% in 2015, economists at the World Trade Organisation said Monday.
Although the 2014 forecast of 4.7% is more than double the 2.1% increase of last year, it remains below the 20-year average of 5.3%. For the past two years, growth has averaged only 2.2%.
The sluggish pace of trade growth in 2013 was due to a combination of flat import demand in developed economies ( 0.2%) and moderate import growth in developing economies1 (4.4%). On the export side, both developed and developing economies only managed to record small, positive increases (1.5% for developed economies, 3.3% for developing economies).
“For the last two years trade growth has been sluggish. Looking ahead, if GDP forecasts hold true, we expect a broad-based but modest upturn in 2014, and further consolidation of this growth in 2015”, WTO Director-General Roberto Azevêdo said. “It's clear that trade is going to improve as the world economy improves. But I know that just waiting for an automatic increase in trade will not be enough for WTO Members.”
“We can actively support trade growth by updating the rules and reaching new trade agreements. The deal in Bali last December illustrates this.”
“Concluding the Doha round would provide a strong foundation for trade in the future, and a powerful stimulus in today’s slow growth environment. We are currently discussing new ideas and new approaches which would help us to get the job done — and to do it quickly.”
Several factors contributed to the weakness of trade and output in 2013, including the lingering impact of the EU recession, high unemployment in euro area economies (Germany being a notable exception), and uncertainty about the timing of the Federal Reserve’s winding down of its monetary stimulus in the United States. The latter contributed to financial volatility in developing economies in the second half of 2013, particularly in certain “emerging” economies with large current account imbalances.
The trade forecast for 2014 is premised on an assumption of 3.0% growth in world GDP growth at market exchange rates, while the forecast for 2015 assumes output growth of 3.1%. Note that the GDP figures are consensus estimates and are not WTO projections. Risks to the trade forecast are still mostly on the downside, but there is some upside potential, particularly since trade in developed economies is starting from a low base. However, volatility is likely to be a defining feature of 2014 as monetary policy in developed economies becomes less accommodative.