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2016 will be the first time in 15 years that the ratio between trade growth and world GDP will fall below 1:1
The World Trade Organization has for the third time lowered its global trade growth forecast for this year to 1.7 per cent, stating that this slowdown is "serious" and should serve as a "wake-up call" for nations.
"World trade will grow more slowly than expected in 2016, expanding by just 1.7 per cent, well below the April forecast of 2.8 per cent," according to the latest WTO estimates released on Tuesday.
In September 2015, the WTO estimated that global trade would rise by 3.9 per cent in 2016. It lowered that projection to 2.8 per cent and now to 1.7 per cent.
Slowing world trade will have implications for India, which has been witnessing decline in exports. Its outbound shipments are in the negative zone since December 2014.
The WTO said: "The contraction was driven (not only) by slowing GDP and trade growth in developing economies such as China and Brazil but also in North America, which had the strongest import growth of any region in 2014-15, but has decelerated since then."
With expected global GDP growth of 2.2 per cent in 2016, this year would mark the "slowest pace" of trade and output growth since the financial crisis of 2009, it said.
WTO director-general Roberto Azevêdo said the dramatic slowing of trade growth is serious and should serve as a wake-up call.
"It is particularly concerning in the context of growing anti-globalization sentiment. We need to make sure that this does not translate into misguided policies that could make the situation much worse, not only from the perspective of trade but also for job creation and economic growth and development which are so closely linked to an open trading system," he said.
If the revised projection holds, 2016 will be the first time in 15 years that the ratio between trade growth and world GDP will fall below 1:1, he added.
"The latest figures are a disappointing development and underline a recent weakening in the relationship between trade and GDP growth," he said.
Further, the WTO said that the forecast for 2017 has also been revised, with trade now expected to grow between 1.8 per cent and 3.1 per cent, down from 3.6 per cent previously.
Photograph: Anindito Mukherjee/Reuters