WORLD TRADE 2011, PROSPECTS FOR 2012
India Tops Export Growth in World Trade
2011
World trade expanded in 2011 by 5.0%, a sharp
deceleration from the 2010 rebound of 13.8%, and growth will slow further still
to 3.7% in 2012, WTO economists project. They attributed the slowdown to the
global economy losing momentum due to a number of shocks, including the
European sovereign debt crisis.
A significant braking of trade expansion had been
forecast for 2011, but multiple economic setbacks during the year dampened
growth beyond expectations and led to a stronger than anticipated easing in the
fourth quarter.
WTO economists cautioned that preliminary trade
figures for 2011 and forecasts for 2012 were difficult to gauge due to the
extraordinary levels of volatility in financial markets and in the broader
economy for the last few years.
The preliminary figure of 5.0% for world
merchandise trade growth in 2011 is down 0.8 points from their most recent
forecast update in September 2011. These figures are in “real” terms, ie, adjusted to account for inflation and exchange rate
fluctuations.
Chart 1: Growth in volume of world merchandise trade and GDP, 2005-13 a
(Annual % change)
a Figures for 2012 and 2013 are projections.
Source: WTO
Secretariat.
The present trade forecast assumes global output
growth of 2.1% in 2012 at market exchange rates, down from 2.4% in 2011, based
on a consensus of economic forecasters. However, there are severe downside
risks for growth that could have even greater negative consequences for trade
if they came to pass. These include a steeper than expected downturn in Europe,
financial contagion related to the sovereign debt crisis, rapidly rising oil
prices, and geopolitical risks.
Developed economies exceeded expectations with
export growth of 4.7% in 2011 while developing economies (for the purposes of
the analysis this includes the Commonwealth of Independent States, or CIS) did
worse than expected, recording an increase of just 5.4%.
Significant exchange rate fluctuations occurred
during the year, which shifted the competitive positions of some major traders
and prompted policy responses (e.g. Switzerland, Brazil). Fluctuations were
driven in large part by attitudes toward risk related to the euro sovereign
debt crisis. The value of the US dollar fell 4.6% in nominal terms against a
broad basket of currencies according to data from the Federal Reserve, and 4.9%
in real terms according to data from the International Monetary Fund, making US
goods generally less expensive in export. Nominal US dollar depreciation also
would have inflated the dollar values of some international transactions.
The value of world commercial services exports
increased by 11% in 2011 to $4.2 trillion, with strong differences in annual
growth rates for particular countries and regions. African exports were hit
hard by the turmoil in Arab countries, recording zero growth as Egypt’s exports
of travel services plunged more than 30%. New quarterly data on services
jointly prepared by the WTO and UNCTAD also displayed a sharp slowdown in the
fourth quarter coinciding with the heightened level of financial market turmoil
surrounding the euro debt crisis.
Prospects for 2012 and 2013
The outlook for world trade darkened in recent months
as the euro sovereign debt crisis threatened to undermine global growth. The
agreement on a debt restructuring plan for Greece has provided some respite for
governments, but at least a mild recession in the European Union may now be
looming, with negative consequences for global trade and output. Emerging and
developing countries would certainly be adversely affected by falling import
demand in the European Union, which is the single largest market for their
exports.
In light of this information, WTO economists are
forecasting a slowdown in merchandise trade volume growth to 3.7% in 2012, with
2.0% export growth anticipated for developed economies and 5.6% for developing
economies (including the Commonwealth of Independent States). On the import side,
the WTO is projecting 1.9% growth for developed countries and 6.2% for
developing economies and CIS.
Figures for 2013 are provisional estimates based on
assumptions about the longer term trajectory of gross domestic product (GDP,
total production in a country) and should be interpreted with an appropriate
degree of caution. World trade volume for that year is expected to recover to
5.6%. Exports of developed and developing economies should increase by 4.1% and
7.2%, respectively. On the import side, developed economies should record
growth of 3.9% while developing economies should advance 7.8%.
Overall, risks to the current forecast are firmly
on the downside. A deeper recession in the euro area would increase social
transfer payments, deprive cash strapped governments of much needed revenue,
and cast doubt on the ability and willingness of countries to service their
debts. This would drive up borrowing costs for countries with challenging
finances and reinforce any downturn.
Rising commodity prices also constitute a risk
factor, but their distributional effects are more ambiguous. High oil prices in
particular constrain economic activity and are associated with recessions in
importing countries. However, buoyant prices also boost the export earnings of
resource producers, which are disproportionately emerging and developing
economies.
Additional perspective on the trade forecast
The WTO’s projected 3.7% growth rate for world
merchandise trade in 2012 is below the long-term average of 6.0% for 1990-2008,
and it is even below the average over the last 20 years including the period of
the trade collapse (5.5%). Should it come to pass, the baseline forecast for
2012 and 2013 would not bring the volume of world trade any closer to its
pre-crisis trend. In fact, the gap should grow larger as long as the rate of
trade expansion continues to fall short of earlier levels
Chart 2: Volume of world merchandise exports, 1990-2013a
Indices, 1990=100
a Figures for 2012 and 2013 are projections.
Source: WTO
Secretariat.
The state of the world economy and trade in 2011
Economic growth
The rate of world output growth fell to 2.4% in
2011 from 3.8% in the previous year, weighed down by the ongoing
sovereign debt crisis in Europe, supply chain disruptions from natural disasters
in Japan and Thailand, and turmoil in Arab countries. This pace of expansion
was well below the 3.2% average over the 20 years leading up to the financial
crisis in 2008.
The fastest growing regions were
the Middle East at 4.9%, followed by the Commonwealth of Independent States at
4.6% and South and Central America at 4.5%. Africa, with GDP growth of 2.3%,
might have grown even faster but for the uprisings that occurred in Libya,
Tunisia, Egypt and elsewhere.
Once again, China’s GDP growth outpaced the rest of
the world at 9.2%, but this rate was no better than what the country achieved
at the peak of the global financial crisis in 2009. In contrast to this
performance, the newly industrialized economies of Hong Kong (China), the
Republic of Korea, Singapore and Chinese Taipei together grew at less than half
the rate of China (4.2%). Developing economies and the CIS together recorded a
5.7% increase in 2011
Aggregate quarterly figures for world GDP growth
are not readily available, but such growth likely slowed toward the end of the
year in the face of headwinds from the European sovereign debt crisis.
Economies using the euro currency (officially referred to as the euro area)
contracted at the equivalent of a 1.3% annual rate in the fourth quarter, marking
the first quarter of negative growth since the currency bloc emerged from
recession in 2009 At the same time, China’s economy
slowed and Japan remained mired in recession. Growth picked up in the United
States in the fourth quarter as unemployment eased, but this was likely
outweighed by developments elsewhere.
Merchandise trade in volume
(i.e., real) terms
World merchandise trade volume grew 5.0% in 2011,
and Asia’s 6.6% increase led all regions. One of the more significant
developments in 2011 was the 8.3% contraction in the volume of Africa’s
exports. This was largely due to the civil war in Libya, which reduced the
country’s oil shipments by an estimated 75%. Japan’s exports also fell by the
same 0.5% as the country’s GDP, while shipments from the CIS advanced just
1.8%.
Although Africa recorded a respectable 5.0%
increase in imports, other resource exporting regions performed better. Imports
of the CIS grew faster than those of any other region at 16.7%, followed by
South and Central America’s at 10.4%. Meanwhile, Japan’s import growth was the
slowest of any major economy or region last year at 1.9%.
India had the fastest export growth among major
traders in 2011, with shipments rising 16.1%. Meanwhile, China had the second
fastest export growth of many major economy at 9.3%.
The combination of low export volume growth and
high import volume growth seen in the Commonwealth of Independent States in
2011 can be attributed to the 32% rise in energy prices for the year, which
boosted export earnings and allowed more foreign goods to be imported.
World prices of selected primary products, 2000-11
Annual % change and $/barrel
a Comprising coffee, cocoa beans and tea.
b Average of Brent, Dubai, and
West Texas Intermediate.
Source: IMF International
Financial Statistics.
Merchandise and commercial services trade in value
(i.e., dollar) terms
The total dollar value of world merchandise exports
jumped 19% to $18.2 trillion in 2011 1. This increase was nearly as large
as the 22% rise in 2010 and was driven in large part by higher primary
commodity prices.
Commercial Services exports also grew 11% in 2011
to $4.1 trillion. The share of commercial services in total goods plus
commercial services trade (technically, on a balance of payments basis) was
18.6, the smallest such share since 1990.
Transport services recorded the slowest growth of
any sub-category services (8%), followed by other commercial services (11%) and
travel (12%).
The slow growth of transport
services is perhaps not surprising considering the close relationship between
this category of services and trade in goods, which was stagnated in the second
half of in 2011. An oversupply of new container ships may have also depressed
revenues in the shipping sector.
Sectoral developments
Prices for traded manufactured goods have tended to
be more stable than those of primary products, both before and after the economic
crisis. As a result, movements in nominal trade flows reflect changes in
quantities reasonably well. With this in mind, Chart 5 shows year-on-year growth in the quarterly value
of world trade in several classes of manufactured goods.
All types of manufactured goods saw year-over-year
growth fall toward zero over the course of 2011. For example, world trade in
automotive products slid from 44% in the first quarter of 2010 to 10% in fourth
quarter of 2011. Office and telecom equipment went from positive to negative,
as year-on-year growth rates fell from around plus 14% in the first quarter to
minus 2% in the fourth quarter.
Chart 4: Quarterly World exports of
manufactured goods by product, 2008Q1-2011Q4
Year-on-year % change
Source: WTO
Secretariat estimates based on mirror data for available reporters in the
Global Trade Atlas database, Global Trade Information Systems.
Exchange
rates
The Japanese yen and the Swiss franc both recorded
significant nominal appreciations against the US dollar in 2011. The yen was up
10% year-on-year, partly due to the safe haven role of the currency during
times of uncertainty. Meanwhile the franc jumped 17%, prompting interventions
by the Swiss National Bank in currency markets to forcing down the value of the
currency, especially against the euro. The Brazilian real was also up 5.4%
against the dollar, and the Chinese yuan and Korean
won rose 4.7% and 4.3%, respectively. Despite the sovereign debt crisis in
Europe, the euro appreciated 5% against the dollar.
Nominal exchange rates such as these may over- or under-state the competitive
effects of exchange rate movements. As a result, “real effective” rates that
average the exchange value of a currency against many trading partners while
adjusting for differences in inflation rates may provide a better indication of
the competitiveness of a country’s exports.
Real effective exchange rates supplied by the
International Monetary Fund show that the US dollar’s depreciation in 2011 was
even stronger in real effective terms (-4.9%) than in nominal terms. On the
other hand, the average appreciation of other major currencies was overstated.
The Japanese yen only appreciated 1.7% in real terms while the Chinese yuan rose 2.7%. Brazil’s currency registered a strong
increase of 4.7% in real effective terms, while the euro’s rise of 1.8% was
relatively small.
Chart 5: Nominal dollar exchange rates, January 2005 — February 2012
Indices of US dollars per unit of national
currency, 2000=100
Source:
Federal Reserve Bank of St. Louis.
<India Moves Up to 19th
Place in World Exports and Keeps 13th Position in World Imports>