This week, the Geneva-based World Trade Organization drastically cut its forecast over trade growth this year by roughly one third to mark the lowest growth rate since 2009. This was a time when the global economy was riddled with a recession and a near financial crisis.
Updating its most recent forecast, on Tuesday, the world’s leading trade agency remarked that the growing anti-globalization sentiment could continue to obstruct growth. And if policymakers respond in a “misguided” manner, it could get much worse, and at an alarming rate.
More specifically, the WTO has adjusted its April prediction for global trade from 2.8 percent down to 1.7 percent; that’s a pretty big jump.
Accordingly, WTO Director-General, Roberto Azevêdo “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.”
It could be entirely possible that the downgrade in growth rate is largely the result of an unexpectedly sharp drop in merchandise trade volumes through the first fiscal quarter. Of course, lower economic growth and trade in developing countries—like Brazil and China—and a deceleration in North American imports could also be at the core of this sharp decline.
Most importantly, though, if the WTO’s forecast is, in fact, accurate, it will be the first time in 15 years that global trade grows at a slower rate than the global economy. The WTO expects, in fact, the global economy to grow at a rate of 2.2 percent.
The WTO Director-General goes on to say, “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.”
In addition to reducing this 2016 forecast, the WTO also cut its projections for next year: down from 3.6 percent to a range of 1.8 to 3.1 percent. As such, the agency now warns of several risks—like the effect of the British vote to leave the EU and growing anti-trade rhetoric around the world—that could further destabilize the growth rate.