The Strategist

WTO Trade Barometer: Global trade is getting weaker

02/18/2020 - 09:34

The growth rate of world trade in the first quarter of 2020 will be weaker than at the end of the past year, despite the conclusion of a trade agreement between the US and China, the World Trade Organization (WTO) indicator Trade Barometer shows. Compared to November last year, its value decreased from 96.6 to 95.5 points (an indicator of less than 100 points indicates a decrease in turnover, more than 100 points indicates an increase).

The deterioration was recorded only in two of the six sub-indices of the indicator. However, for container shipments, which only showed growth in November, the decline was significant - from 100.8 to 94.8 points. The sub-index for agricultural raw materials also decreased (from 91.4 to 90.9 points). For export orders, the indicator slightly improved - from 97.5 to 98.5 points, and for car deliveries it reached 100 points (99.8 points in November). At the same time, while the air freight value of the sub-index has improved, it still indicates a decrease in activity (94.6 versus 93 points); the decline in the electronics trade has stabilized - 92.8 points against 88 points in November.

The growth rate of global exports has been steadily decreasing over the past two years, and in July – September 2019 it turned out to be completely negative (minus 0.2% compared to the same period in 2018, in the first quarter the growth was 1%, in the second - 0.3%) . In general, for the year, the WTO expects trade growth of only 1.2%; for this year the forecast is still more positive - 2.7%, but further dynamics will depend on the impact of the spread of coronavirus and how fast the recovery of the global economy will be.

The fall in business activity against the backdrop of the fight against the virus will negatively affect the Japanese economy, which may end up in a technical recession in the first quarter of this year (for this GDP should be decreasing for at least two consecutive quarters), ING Bank expects. In October-December, the country's GDP has already decreased by 1.6% compared to the previous quarter, but the decline was caused by a contraction in consumption amid an increase in sales tax from 8% to 10% (for the whole of 2019, growth was positive and amounted to 0.8%). Now, the Central Bank of Japan regards the influence of the coronavirus as the main risk: has said that the bank will consider additional policy easing if the outbreak poses a serious threat to the Japanese economy and price trends.