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World Trade Organization (WTO) Director-General Roberto Azevedo attends a news conference on the annual global trade forecast at the WTO headquarters in Geneva, Switzerland, April 2, 2019. REUTERS/Denis Balibouse

DENIS BALIBOUSE/Reuters

World trade shrank by 0.3 per cent in the fourth quarter of 2018 and is likely to grow by 2.6 per cent this year, slower than 3.0 per cent growth in 2018 and below a previous forecast of 3.7 per cent, the World Trade Organization said on Tuesday.

In its annual forecast, the WTO said trade had been weighed down by new tariffs and retaliatory measures, weaker economic growth, volatility in financial markets and tighter monetary conditions in developed countries. It forecast in September that 2018 growth would be 3.9 per cent, down from 4.6 per cent in 2017.

“With trade tensions running high, no one should be surprised by this outlook. Trade cannot play its full role in driving growth when we see such high levels of uncertainty,” WTO Director-General Roberto Azevedo said in a statement.

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“Of course, there are other elements at play, but rising trade tensions are the major factor,” he told a news conference. “I think it’s pretty obvious that the tensions between the United States and China play a big role.”

He declined to predict the impact of Britain’s departure from the European Union.

Although the volume of trade grew only slowly in 2018, the dollar value rose 10 per cent to $19.48 trillion, partly due to a 20 per cent rise in oil prices, the WTO said.

The value of commercial services trade grew by 8 per cent to $5.80 trillion in 2018, driven by strong import growth in Asia.

Goods trade volumes are expected to grow more strongly in developing economies this year, with 3.4 per cent growth in exports compared with 2.1 per cent in developed economies.

But the forecast is highly uncertain, with this year’s 2.6 per cent global growth figure just the midpoint of a range from 1.3 to 4.0 per cent. The actual growth rate could be even higher or lower if trade tensions grow further or ease, the WTO said.

“Most risks remain firmly on the downside, with upside potential hinging on a relaxation of trade tensions,” the WTO report said.

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