WTO "Sharply Downgrades" Trade Forecast for 2019-2020

alt — Shanghai Yangshan port (file image)

The World Trade Organization announced Tuesday that it has "sharply downgraded" its trade forecast for 2019-2020, citing rising trade tensions and a slowing global economy.

In an advisory the WTO's economists predicted that merchandise trade growth would come in at 1.2 percent for 2019, less than half of the expected 2.6 percent forecast issued in April. The forecast for this year contains considerable variability and downside risk: trade growth could fall below 0.5 percent if trade tensions continue to rise, or could even exceed 1.6 percent if tensions begin to recede. The uncertainties are are "heavily weighted to the downside and dominated by trade policy," WTO warned.

The trade growth forecast for next year is down to 2.7 percent from a previous estimate of 3.0 percent, and it assumes that trade relations return to previous norms. WTO cautioned that it could fall anywhere between 1.7 to 3.7 percent, depending upon trade policy choices.

WTO's global GDP growth forecast is now at 2.3 percent for 2019 and 2020, down from 2.6 percent.

“The darkening outlook for trade is discouraging but not unexpected. Beyond their direct effects, trade conflicts heighten uncertainty, which is leading some businesses to delay the productivity-enhancing investments that are essential to raising living standards," said WTO Director-General Roberto Azevêdo. "Job creation may also be hampered as firms employ fewer workers to produce goods and services for export. Resolving trade disagreements would allow WTO members to avoid such costs."

WTO is specifically concerned about national policy measures that have the effect of making trade less profitable and destabilizing markets. These include further escalating rounds of tariffs, alterations to national monetary and fiscal policies, and a disorderly Brexit, which could have a significant regional impact in Europe.

Azevêdo called on WTO member nations to help reform the WTO and to use multilateral trading systems as a means of settling differences.