World trade growth slid to 5.5% last year from 8.5% in 2006 and may grow even more slowly in 2008 — at about 4.5% — as sharp economic deceleration in key developed countries is only partly offset by continuing strong growth in emerging economies, according to World Trade Organization economists.
WTO economists cautioned that their preliminary assessment of 2007 trade figures and forecasts for this year have been unusually difficult to gauge due to the uncertainty caused by sharp market fluctuations.
The financial market turbulence, which has considerably reduced economic growth projections for some major developed markets, has clouded the prospects for world trade in 2008.
The present economic growth forecast for these markets is 1.1%. For developing countries, growth is forecast at above 5%. Together these could result in world output growth of 2.6% and a global trade expansion of about 4.5% in real terms, that is, discounting inflation.
“These are uncertain and troubling times for the global economy,” said Director-General Pascal Lamy. “To date, the financial market turmoil, significant price surges and the slow-down of developed economies have not led to a disruption of trade. But protectionist pressures are building as policymakers seek answers to the problems that confront us. More than ever we must reinforce our global trading system with rules that are more transparent, predictable and equitable.
“A reinforced trading system is an essential anchor for economic stability and development. Clearly, the best way to achieve this is to conclude the Doha Development round. The time for posturing and delay has ended. What we need now is action,” he said.
The preliminary figure of 5.5% trade growth for 2007 is slightly lower than the 6% forecast for 2007 this time last year. The global economy and world trade started to slow down in 2007 due to the deceleration of demand in the developed regions. North America showed the weakest growth in output, measured as gross domestic product (GDP).
Developing economies and the Commonwealth of Independent States (CIS) region 1, however, maintained or strengthened their expansion of output, contributing more than 40% of world output growth in 2007. Developing countries’ share of world merchandise trade (exports plus imports) reached a new record level of 34% in 2007.
These two groups of countries are expected to record faster growth in imports than exports; together they are expected to contribute more than one half of global import growth in 2008.
The sharp rise of commodity prices — particularly fuels and metals — greatly improved the financial situation of most developing regions and boosted imports. But, higher energy and food prices translated into inflationary pressures worldwide.
Significant variations occurred among major currencies, but not all exchange rate movements were helpful to redress global imbalances. While European currencies appreciated vis-à-vis the US dollar, changes in the currencies of Asian economies with large current account surpluses had a mixed impact.
The decline of the US dollar in relation to the euro and other European currencies inflated the dollar values of international trade transactions. The dollar value of world merchandise exports rose by 15% to $13.6 trillion, and that of commercial services by 18% to $3.3 trillion in 2007.
In real terms — with adjustment for price and exchange rate changes — real merchandise exports were up by 5.5% in 2007 compared to 8.5% in 2006.
