WTO “Wake Up Call”

Posted | 29/09/2016 / Views | 3235
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A couple of weeks ago we talked about the limitations of GDP growth as a measure of the health of the economy.  Quite simply GDP can be bought with debt, created by government, and manipulated through spurious adjustments.  What is a far more pure and direct measure is global trade. 

The World Trade Authority (WTO) just released their latest update and, in the context of a decline for the last 5 years, they have downgraded 2016 further to just 1.7% from 2.8% just 5 months ago.  That is quite simply an alarming slow down, 40%, in less than a half a year.

Unfortunately it gets worse with the 2017 forecast slashed by up to 50% from previous projections to between 1.8% and 3.1%.  This is the first time they have given a range, though their track record would indicate it will be at or below the lower bound of that range as well.

When you combine that with a GDP forecast of just 2.2% (again a figure that seems to be continually revised down) we are now faced with 2016 presenting the almost certain outcome of a global trade to GDP ratio below 1:1, the first in 15 years.

Of course that hot topic of globalisation is again in the headlines with the director general of WTO having this to say in regards to the shock announcement and taking clear aim at Trump and the Brexit movement:

"The dramatic slowing of trade growth is serious and should serve as a wake-up call. It is particularly concerning in the context of growing anti-globalization sentiment.  We need to make sure that this does not translate into misguided policies that could make the situation much worse, not only from the perspective of trade but also for job creation and economic growth and development which are so closely linked to an open trading system.”



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