The Econ-versation: World Trade Organization forecasts slower global trade

Silvia Buonocore, Senior Writer

The World Trade Organization (WTO) curtailed their original trade growth projections for 2019 and 2020. World trade in merchandise is now expected to grow 1.2 percent in 2019, which is a drop from the April prediction of 2.6 percent growth. The 2020 prediction was originally 3.0 percent growth but has now been lowered to 2.7 percent.

The lower projections can be attributed to slower global economic growth and higher tensions in trade. The projections are still subject to change, as they are dependent on the outcome of future trade relations.

While trade conflicts are the largest determinant in creating these forecasts, other economic factors include macroeconomic shocks — unexpected changes in the economy — and financial volatility, a measure of fluctuation in prices and returns of securities.

Due to unpredictability in these determinants, the growth rate for world trade in 2019 is projected to be between 0.5 percent and 1.6 percent, and for 2020 it is projected to be between 1.7 percent to 3.7 percent.

WTO Director-General Roberto Azevêdo has stressed that since trade tension causes uncertainty, there may be additional effects aside from slower trade growth, such as slowing the creation of jobs and causing businesses to push off investments that may raise living standards.

The WTO forecasts were based on consensus estimates of world GDP growth of 2.3 percent for 2019 and 2020, which is a decrease from the previous forecast of 2.6 percent. This lower prediction is also connected to global trade tensions, as well as region-specific factors.

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