Global Trade Sees Cyclical Upturn
Thursday, June 1, 2017
Following the weakest year for the global economy since the financial crisis, growing only 2.5 percent, nearly all indicators point to higher growth of 2.9 percent in 2017 and 2018, according to the latest Atradius Economic Outlook. Trade is recovering, consumer spending is robust, investment is picking up slightly, and overall sentiment is increasingly positive.
Advanced markets are contributing more strongly to global growth, underpinned by strong private consumption growth and increasingly higher investment. After a difficult year, emerging markets are also seeing stronger growth, supported by higher commodity prices and better policymaking.
“Trade growth is emerging from the doldrums,” said John Lorié, global chief economist at Atradius. “After slowing to only 1.3 percent in 2016, stronger economic outlooks across both emerging and developed market economies are promising a more positive outlook for global trade growth in 2017. We now expect the volume of trade to expand 3.2 percent this year.”
However, the world economy is not out of the woods yet, and an unusual amount of uncertainty is clouding the outlook. While sentiment is high and forward-looking indicators point to higher trade growth, it is unlikely to reach its pre-crisis growth level of around twice GDP growth. China is turning inward and rebalancing to consumption from investment, cooling down one of the world’s greatest engines of trade demand. Furthermore, the global value chain networks have largely been established and are instead now turning more local. Trade liberalization efforts have stalled, especially in advanced markets, as evidenced by the scrapping of TPP and TTIP. Anti-trade rhetoric is also driving increasing uncertainty that could constrain long-term growth.
“The latest upturn in global trade is on the back of positive cyclical developments,” Lorié said. “Structural developments, on the other hand, such as Chinese rebalancing and less room for growth from factors like global value chain fragmentation will keep trade growth subdued. Moreover, while the 2017-18 outlook for global trade is brighter, it could prove lower than expected due to high policy uncertainty, stemming from US protectionism.”
Read the May Economic Outlook.