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OECD forecasts 2% growth in global trade for 2015

09 Nov 2015
Financial Nigeria

Summary

The Paris-based think tank projects a gradual strengthening of global growth in 2016 and 2017 to an annual 3.3% and 3.6%, respectively.

Roberts Orya is Managing Director / Chief Executive Officer, Nigerian Export – Import Bank and honorary President, Global Network of Exim Banks and Development Finance Institutions.

The Organisation for Economic Co-operation and Development (OECD) has said it finds the slowdown in global trade “deeply concerning.” In its latest bi-annual Economic Outlook released today in Paris, the OECD said global trade would grow by 2% this year. According to the OECD, over the past 50 years, only in 1975, 1982. 1983, 2001 and 2009 did global trade grow by 2% or less.

The new report also states that the weak global trade statistics and a downturn in emerging market economies have weakened global growth to around 2.9% this year and is a source of uncertainty for near-term prospects. The organisation had forecast 3% for global output in September and 3.7% for 2015 last November.

"This is deeply concerning," OECD Chief Economist Catherine Mann said in the introduction to the report. "World trade has been a bellwether for global output."

The Paris-based think tank, nevertheless, projects a gradual strengthening of global growth in 2016 and 2017 to an annual 3.3% and 3.6%, respectively.

While presenting the Outlook in Paris, OECD Secretary-General Angel Gurría said: “The slowdown in global trade and the continuing weakness in investment are deeply concerning. Robust trade and investment and stronger global growth should go hand in hand. G-20 leaders meeting in Antalya need to renew their efforts to secure strong, sustainable and balanced growth.”

The organisation said output remains on a solid growth trajectory in the United State, propelled by household demand, with GDP expansion expected to be 2.5% next year and 2.4% in 2017. The recovery in the euro area is set to strengthen, helped by accommodative monetary policy, lower oil prices and an easing of the pace of budget tightening. Euro area activity is expected to grow by 1.8% in 2016 and 1.9% in 2017.

Economic growth in China is projected to slow to 6.8% in 2015 and to continue to decline gradually. The OECD said as China rebalances towards consumption and services, its GDP growth would decelerate to 6.2% by 2017.

The headwinds in emerging markets are weaker commodity prices, tighter credit conditions and the risk that capital outflows and sharp currency depreciations may expose financial vulnerabilities.

While speaking in Doha, Qatar's capital, after a meeting with ministers and officials from the six-nation Gulf Cooperation Council (GCC), Managing Director of International Monetary Fund, Christine Lagarde said countries could no longer rely on revenues from oil and gas. Brazil and Russia have experienced recessions and will not return to positive growth in annual terms until 2017.

By contrast, growth prospects in India remain relatively robust, with GDP growth expected to remain over 7% in the coming years, provided further progress is made in implementing structural reforms.

The Outlook calls for greater ambition by OECD and G20 countries in supporting demand and pursuing structural reforms to boost potential growth and ensure that its economic benefits are shared by all.

It calls for policies to support short-term demand, including on-going monetary and fiscal policy support in accordance with countries’ policy space. Collective action to increase public investment is essential and would increase growth without increasing debt-to-GDP ratios.

The OECD urged the US Federal Reserve to go ahead with its rate hike since as a recovery gains steam in the United States and Europe, despite a slowdown mostly centered on emerging markets and China. Strong jobs data released in the US on Friday further increased the odds of a rate hike in December.


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