World trade is expected to grow by 4.7 percent in 2014, more than double the 2.1 percent increase last year, the WTO says. The growth however could be subdued by increasing geopolitical tensions and the slowdown in developing economies, the report warns.
“Prospects for world trade and output in 2014 and 2015 are better than they have been for some time,” says the WTO news release.
In its latest forecast the WTO said the global recovery and the upturn in the US and especially Europe are likely to lead to stronger than expected trade growth.
While developed economies are strengthening, “the developing economies are now the focus of several gathering risks.” Even some of the most dynamic developing countries that until recently were propping up global demand.
Among the most terrifying threats are large current account deficits, particularly in India and Turkey, currency crises in Argentina, overinvestment in productive capacity, and rebalancing economies to rely more on domestic consumption and less on external demand.
The WTO is also concerned about the geopolitical risks such as civil conflicts and territorial disputes in the Middle East, Asia and Eastern Europe, which could provoke higher energy prices and disrupt trade flows if they escalate. All these factors “have introduced an additional element of uncertainty to the forecast,” says the Geneva-based organization.
Despite the positive outlook, the 2014 world trade forecast remains below the 20-year average of 5.3 percent, or the pre-crisis average of 6 percent growth seen through most of the 1990s and 2000s. For the past two years, growth has averaged only 2.2 percent.
The slow pace of trade growth in 2013 was caused by a combination of almost flat import demand dynamics, which grew 0.2 percent in developed economies and a moderate import growth of 4.4 percent in developing economies. On the export side, both developed and developing economies only managed to record small, positive increases of 1.5 percent for developed economies, and 3.3 percent for developing economies.
The WTO Director-General Roberto Azevêdo urged countries to cooperate, pointing that common assistance may push trade forward.
“It's clear that trade is going to improve as the world economy improves. But I know that just waiting for an automatic increase in trade will not be enough for WTO Members,” Roberto Azevêdo said.
“We can actively support trade growth by updating the rules and reaching new trade agreements. The deal in Bali last December illustrates this.” The Bali deal was the first agreement to remove red tape at borders around the world.