NEW YORK: A steeper than expected slowdown in China is rippling through the global economy and dragging on its recovery, the World Trade Organisation warned as it lowered its forecast for global trade this year.
WTO economists forecast growth of 2.8 per cent, from 3.3 per cent previously, and warned that their prediction remained vulnerable to a cloudy outlook for the world economy. They also warned that even that pessimistic view may be subject to more downgrades.
“If the slowdown in emerging markets worsens the revised forecasts . . . could still prove to be overly optimistic,” they said.
“In particular, a slower rebound from recent declines in developing economies’ imports could shave half a percentage point off global trade growth in 2015.”
The dim view of global commerce came before next week’s release of the International Monetary Fund’s latest forecasts, which are expected to see a downgrade in its 3.3 per cent growth prediction for the global economy this year.
It also reinforced what some have seen as a grim shift in the world economy since the 2008 global financial crisis.
For decades before the crisis global trade reliably grew at twice the rate of the global economy as part of what some have called an era of “hyperglobalisation”, fed by the rise of China and other emerging markets.
But by some measures it contracted in the first half of this year and WTO economists said they expected 2015 to be the fourth year in a row that the volume of global trade grew at, or below, the rate of the broader economy. Some economists have pointed to that trend as evidence that globalisation has peaked, particularly as technological advances such as 3D printing and higher labour costs in places such as China cause corporations to shorten global supply chains and bring production closer to home.
The WTO said it expected a rebound in trade next year, forecasting growth of 3.9 per cent in 2016.
The organisation also said it expected exports to be stronger from developed economies this year than from emerging markets.
Exports from developed economies should rise 3 per cent this year while those of developing economies would grow 2.4 per cent.
The WTO said the biggest cause of the slowdown in global trade remained the world’s slow recovery from the 2008 financial crisis and the shifting patterns of that recovery.
Iit was previouisly the slowing economies in Europe or the US that dragged most on global trade but that role now appears to be played by China.
The biggest shift in the WTO’s forecasts came in Asia where, thanks largely to China’s slowing imports and exports, the predicted growth in exports was lowered to 3.1 per cent from the 5 per cent WTO economists forecast in April. On the import side, the prediciton was almost halved to 2.6 per cent from 5.1 per cent because of the impact of Chinese imports which were down 2.2 per cent year on year in the second quarter of 2015.
WTO economists said the composition of China’s trade also illustrated the impact its rebalancing from an export-led to a more consumption-led growth model was having on its neighbours and the global economy.
The customs statistics for August pointed to large year-on-year falls for items such as iron and steel and imported machinery. At the same time China had record rises in demand for agricultural products with its imports of cereal grains growing 130 per cent.
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