The WTO says the cut is mainly because trade has grown more slowly than expected in recent months and the outlook for the global economy is increasingly uncertain.
Since the original forecast for 2011 was issued on April 22, 2011, the WTO noted that 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.
“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 3.7% and their output to go up by 1.5%. Meanwhile, shipments from developing economies are estimated to increase by 8.5% and GDP by 5.9%,” said WTO in a statement September 23, 2011.
Disappointing output and employment data have damaged business and consumer confidence and contributed to the recent turmoil in financial markets, it adds.
The organisation explains that the original forecast from the April press release was quite cautious about the prospects for trade in 2011 and as a result, the size of this revision is relatively small.
“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, which leaves the original forecast not too far from the mar,” it said.
According to the WTO it appears that the trade slowdown is mostly confined to developed economies, especially in Europe and it suggests that solving the sovereign debt crisis may be the best way to avoid a more serious trade slump.
“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,” says Pascal Lamy, WTO Director-General.
By Ekow Quandzie