Namely, global growth is expected at just 1.2%, in comparison to the 2.6% that had been forecast in the April report. This would represent the lowest growth in trade volumes since 2009.
In addition, expectations for global trade growth have also been lowered for 2020, and is now forecast at 2.7%, falling from 3%. The WTO warns that risks to these forecasts are weighted to the downside, with these risks containing a possible deepening of trade tensions, financial volatility and rising geopolitical tensions in many regions of the world.
In fact, world goods trade increased by only 0.6% in the first half of 2019, with the WTO expecting a slight recovery in the second half of the year in order for volumes to reach the projected growth of 1.2%, which reflects normal seasonality from a shipping perspective.
High growth in trade volumes in 2017 indicated strong growth in industrial production in developed countries. Nonetheless, during the last two years, industrial production has been reduced, with OECD countries reporting a year-on-year decline in industrial production for much of 2019, causing a lower trade volume growth.
In addition to the WTO’s trade growth downgrades, the IMF has revised its GDP growth projections down for 2019 and 2020. Now, global growth is expected to slow to 3% in 2019, falling 0.2 points from the IMF’s July report, prior to increasing to 3.4% in 2020. However, the latter would still be below 2018’s 3.6%.
The low GDP growth predictions from the IMF come despite governments around the world implementing stimulus measures. The IMF estimates that without these, global growth would be 0.5 points lower in both 2019 and 2020 (at 2.5% and 2.9%, respectively). The higher growth as a result of these packages is, of course, good news for the shipping industry, but also leaves the question of whether there is more that can be done to lift growth – especially in advanced economies – or if governments have simply run out of options for stimulating their economies?
Peter Sand, Chief Shipping Analyst at BIMCO, said.
What is more, BIMCO notes that while the current IMF outlook sees growth improving in the next few years, up to 3.6% in 2024, forecast growth for a certain year tends to fall as it approaches. Therefore, BIMCO does not expect global growth to reach the levels currently forecast by the IMF, and warns against expecting global growth to boost shipping over the next few years.
As for the trade war between the US and China, they are rumoured to be close to an agreement on phase one of a deal. If this gets signed, it could ease tensions, reducing the risk of additional escalation of the trade war.
We have, however, been in a similar situation several times before over the past year, and although the current tariff delays are good news for trade volumes, BIMCO remains concerned that this trade war may continue to drag on into 2020 and, potentially, beyond. Even if a phase one deal can be signed, the hardest parts of an agreement are yet to be worked on
Mr. Sand explains.
Moreover, after a WTO ruling on aid given to Airbus, the US has imposed higher tariffs on USD 7.5 billion worth of EU goods, worsening global trading relationships.
As a result, BIMCO highlights that imposing tariffs is bad not only for the economies directly involved, and shipping between them, but also for the global economy and trade overall.