The World Trade Organization (WTO) says global trade and economic prospects for 2006 are uncertain, and depend in large part on oil prices and global imbalances. In its annual World Trade Report 2005, WTO says trade continued to grow last year, but at a slower pace than the year before, reflecting a weaker world economy.
The World Trade Organization says cross-border trade got off to a sluggish start in 2005, but picked up mid-year to end the year with a six percent growth in the volume of goods and services traded. It says this pales in comparison with the exceptional nine percent growth registered in 2004. The report predicts the world economy will continue to strengthen despite some downside risks, and that world trade will expand by seven percent in 2006.
WTO's chief economist, Patrick Low, warns, a further rise in oil prices, increased real interest rates and global imbalances could adversely affect these trade projections.
He says the United States' trade and current account deficits widened in 2005, and that, he says, is a cause for concern.
"There is real crystal ball gazing to know what is going to happen," he explained. "There are people who think that this is a perfectly sustainable state of affairs, the situation with the global imbalances. And there are others who think we are headed for trouble. And mid-way between that, there are people who feel that there is a prospect that this is going to have to turn around, that you cannot continue to grow these imbalances indefinitely, but that there are reasons to believe that markets will work in a way, which allow a turnaround to be orderly, and not visit a significant economic shock on the world economy. But equally there are those who are not."
WTO says Africa, the Middle East, Central and South America and the countries of the former Soviet Union recorded strong merchandise export growth last year. This, it said, was fueled by the rise in oil prices.
The report finds the marked rise in prices for fuels boosted the trade surplus of the oil exporting countries and deepened the trade deficit in many oil-importing countries.
It says Europe's trade performance was sluggish, and its export and import growth were weaker than in all other regions. It says the rise in North America's merchandise and services exports remained slightly below the global expansion rate.
WTO senior economist Michael Finger says Asia has been and will continue to be the engine of global economic growth.
"Forecast by government sources for India and China expect a small moderation of growth for 2006, but nevertheless, it will be well above eight percent," he said. "That is much more than other developing economies, and much more than the developed economies. So, it continues to be true that the major economies in East Asia are one of the motors of international economy and international trade."
Finger says China's exports grew by 28 percent last year. Given its phenomenal growth and 1.3 billion population, he says, China can be expected to play a much larger role in the global economy in the future.