The World Trade Organization on Friday downgraded its trade growth forecast for 2012 by 32 percent and by 19.6 percent in 2013, citing slowing global output amid a more interconnected marketplace.
The WTO expects global trade to expand 2.5 percent in 2012, compared to a 3.7 percent growth estimate made in April. International trade will rise 4.5 percent in 2013, a 1.1 percentage point revision from its spring forecast. WTO Director-General Pascal Lamy said the recent wave of U.S. quantitative easing and actions to reinforce the euro were key to boosting growth, but more needs to be done to promote free trade.
“The last thing the world economy needs right now is the threat of rising protectionism,” he said.
The continuing European sovereign debt crisis and the resulting drop in trade with EU members was the main driver of the WTO’s downgraded forecast. Disappointing U.S. production and job growth, along with slowing Chinese manufacturing expansion, also spurred the forecast revision.
“All of these factors have contributed to an easing of global trade growth, which slowed to a crawl in the second quarter according to new quarterly merchandise trade volume statistics compiled by the WTO,” according to the organization.
World trade in the second quarter expanded 1.2 percent and 0.3 percent from the first quarter. The WTO based its forecast on the assumption that the EU will hold off a breakup of euro membership and the United States will dodge a looming $120 billion sequestration aimed at cutting the federal deficit.