World trade expanded in 2011 by 5.0 percent, a sharp deceleration from the 2010 rebound of 13.8 percent, and growth will slow further still to 3.7 percent in 2012, WTO economists project. They attributed the slowdown to the global economy losing momentum, due to a number of shocks, including the European sovereign debt crisis.
A significant braking of trade expansion had been forecast for 2011. But multiple economic setbacks during the year dampened growth beyond expectations and led to a stronger than anticipated easing in the fourth quarter.
“More than three years have passed since the trade collapse of 2008-09. But the world economy and trade remain fragile. The further slowing of trade expected in 2012 shows that the downside risks remain high. We are not yet out of the woods,” said WTO Director General Pascal Lamy.
WTO economists cautioned that preliminary trade figures for 2011 and forecasts for 2012 were difficult to gauge, due to the extraordinary levels of volatility in financial markets and in the broader economy for the last few years.
The preliminary figure of 5.0 percent for world merchandise trade growth in 2011 is down 0.8 points from their most recent forecast update in September, 2011. These figures are in “real” terms - i.e., adjusted to account for inflation and exchange rate fluctuations.
The present trade forecast assumes global output growth of 2.1 percent in 2012 at market exchange rates, down from 2.4 percent in 2011, based on a consensus of economic forecasters. However, there are severe downside risks for growth which could have even greater negative consequences for trade, if they came to pass. These include a steeper than expected downturn in Europe, financial contagion related to the sovereign debt crisis, rapidly rising oil prices, and geopolitical risks.
Recent production data suggest that the European Union may already be in recession, and even China’s dynamic economy appears to be growing more slowly in 2012. Economic prospects have improved in the United States and Japan, as labor market conditions improve in the former, and business orders pick up in the latter. But these positives will only partly make up for the earlier negatives.
Developed economies exceeded expectations with export growth of 4.7 percent in 2011, while developing economies (for the purposes of the analysis this includes the Commonwealth of Independent States, or CIS) did worse than expected, recording an increase of just 5.4 percent. In fact, shipments from developing economies other than China grew at slightly slower pace than exports from the developed economies, which included disaster-struck Japan. The relatively strong performance of developed economies was driven by a robust 7.2 percent increase in exports from the United States, as well as a 5.0 percent expansion in exports from the European Union. Meanwhile, Japan’s 0.5 percent drop in exports detracted from the average for developed economies overall.