The World Trade Organization (WTO) has announced that it has lowered its trade growth forecast to 3.3 percent this year and to 4 percent for 2016 due to lethargic economic growth.
WTO Director-General Roberto Azevedo stated that the body expects “trade to continue its slow recovery, but with economic growth still fragile and continued geopolitical tensions, this trend can easily be undermined.”
Although the forecasts propose some modest growth in world trade, they represent a repetition of previous downward revised trade forecasts.
Last year trade growth was at 2.8 percent, below the WTO’s original projection of 3.1 percent.
The WTO’s latest growth prediction of 3.3 percent was revised down for the third time this year, previously having declined from 5.3 percent to 4.0 percent.
In contrast to the annual average of 6.0 percent growth between 1990 and the global financial crisis in mid-2007, the average rate of growth has been 2.4 percent over the last three years.
From 1980 to 1984 was the only period other than during the Second World War where a weak trade growth was recorded. The oil shock and recession of 1980-1981 were two factors which affected trade during this period.
It is currently unclear if falling oil prices will be positive for trade or not as fluctuations in currency have been linked to the increasing complicity in the global trade.
The falling oil prices have had a negative effect on major exporter countries such as Russia as they constitute their main source of income, and lower revenues have restricted their purchasing power. However, low oil prices are not negatively affecting oil importing countries such as Turkey which benefit from the low cost of production.