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Spelling greater trouble for India’s slowing export sector, the World Trade Organisation has lowered its growth projection for world merchandise trade for 2019 to 1.2 per cent against a 3 per cent growth achieved the previous year. Rising protectionism and escalating trade tensions between countries is partly responsible for the slowdown.
The revised estimate is lower than the initial estimate of 2.6 per cent growth that was projected by the organisation in April this year.
The estimate for growth in world trade in 2020 has also been lowered to 2.7 per cent compared to 3 per cent predicted in June this year. Economists have warned that the 2020 growth projections are based on expectations that the world would return to more normal trade relations by then.
WTO Director-General Roberto Azevêdo said: “The darkening outlook for trade is discouraging but not unexpected. Beyond their direct effects, trade conflicts heighten uncertainty, which is leading some businesses to delay the productivity-enhancing investments that are essential to raising living standards."
The decline in growth projection in world trade is a reason for concern for India’s export sector which is going through a rough time this fiscal. Total exports for the period April-August 2019-20 was lower by 1.53 per cent at $133.54 billion while exports in August 2019 contracted by 6.05 per cent to $ 26.13 billion compared to the previous year.
Slowdown effect
The updated trade forecast of the WTO is based on world GDP growth estimated at 2.3 per cent for both 2019 and 2020, down from 2.6 per cent previously. Slowing economic growth is partly due to rising trade tensions but also reflects country-specific cyclical and structural factors, including the shifting monetary policy stance in developed economies and Brexit-related uncertainty in the European Union, the report added.
In the first half of 2019, world merchandise trade was up 0.6 per cent, marking a substantial slowdown compared to recent years. Exports of developed economies were up just 0.2 per cent, while those of developing economies were up 1.3 per cent. On the import side, developed economies recorded year-on-year growth of 1.1 per cent while developing countries declined by 0.4 per cent.
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