WTO scales back trade forecast to 5.8 %

The World Trade Organisation (WTO) Director-General Pascal Lamy has announced that they are revising their 2011 trade forecast to 5.8%, down from their earlier conservative estimate of 6.5%, since trade has grown more slowly than expected in recent months and the outlook for the global economy is increasingly uncertain. Pascal Lamy said in a statement issued here Friday,'''' "The multilateral trading system has been instrumental in maintaining trade openness during the crisis, thereby avoiding even worse outcomes. Members must remain vigilant. This is not the time for go-it-alone measures. This is the time to strengthen and preserve the global trading system so that it keeps performing this vital function in the future." In light of the deteriorating economy, the WTO now expects world merchandise exports to increase by 5.8% in volume terms in 2011, supported by real GDP growth of 2.5%. Since the original forecast for 2011 was issued on April 22, developed economies in particular have been buffeted by strong headwinds, including the lingering effects of the earthquake and tsunami in Japan, the prolonged budget impasse and credit downgrade in the United States, and the ongoing euro area sovereign debt crisis. Disappointing output and employment data have damaged business and consumer confidence and contributed to the recent turmoil in financial markets. In light of the deteriorating economy, the WTO now expects world merchandise exports to increase by 5.8% in volume terms in 2011, supported by real GDP growth of 2.5%. Developed economies exports are expected to rise by 3.6% and their output to go up by 1.5 %. Meanwhile, shipments from developing economies are estimated to increase by 8.6% and GDP by 5.9%. General Director Pascal Lamy went on to say,"The multilateral trading system has been instrumental in maintaining trade openness during the crisis, thereby avoiding even worse outcomes. Members must remain vigilant. This is not the time for go-it-alone measures. This is the time to strengthen and preserve the global trading system so that it keeps performing this vital function in the future." The situation in Greece is injecting considerable uncertainty into the economic environment. The economy may be at an inflection point where growth could pick up if policy makers devise a solution to the debt crisis that restores confidence in the financial system. On the other hand, policy missteps could trigger wider instability along the lines of the crisis that followed the failure of Lehman Brothers in 2008. Weighing these factors, we believe that risks to the forecast are firmly rooted on the down side, but we should not ignore the fact that there is some upside potential. The trade impact of the Japanese disaster turned out to be less than we expected, but the drag imposed by turbulent financial markets could end up being larger than anticipated