Growing trade tensions between large economies coupled with tighter credit market conditions is expected to slow down the global trade growth to 3.9 per cent in 2018 and further to 3.7 per cent in 2019, according to the World Trade Organisation (WTO).

"The new forecast for 2018 is below WTO's April 12 estimate of 4.4 per cent but falls within the 3.1 per cent to 5.5 per cent growth range indicated at that time. Trade growth in 2018 is now most likely to fall within a range from 3.4 per cent to 4.4 per cent," according to an official release circulated on Thursday.

"While trade growth remains strong, this downgrade reflects the heightened tensions that we are seeing between major trading partners. More than ever, it is critical for governments to work through their differences and show restraint," WTO Director General Roberto Azevedo said.

The report, however, did not directly mention the US and China which are engaged in a tariff war. The updated trade forecast is based on the expectations of world real GDP growth at market exchange rates of 3.1 per cent in 2018 and 2.9 per cent in 2019.

The WTO cautioned that developing and emerging economies could experience capital outflows and financial contagion as developed countries raise interest rates, with negative consequences for trade.

"Geopolitical tensions could threaten resource supplies and upset production networks in certain regions. Structural factors such as the rebalancing of the Chinese economy away from investment and towards consumption are still present and could weigh on import demand due to high import content of investment," the release said.

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