Global trade to dip on weak demand: WTO

India will continue to have trade deficit with imports growing at a much rapid pace.

Global trade is expected to decelerate to about 4.5 per cent this year, against 5.5 per cent in 2007, because of the heightened recessionary prospects in the United States coupled with weaker demand growth in both Europe and Japan, the World Trade Organisation (WTO) said yesterday.

Releasing its grim forecast for the current year, WTO economists warned about several downside risks as well as rising inflationary pressures because of the increase in commodity prices and lax monetary conditions.

"The continued turmoil in financial markets and the downside risks, including inflationary tendencies, are a cause for concern," said Patrick Low, chief economist, WTO.

However, the real economy is yet to be adversely affected by the financial markets, he said, suggesting that the US and Germany are continuing to do well in their exports and imports.

Faced with increasing commodity prices, growing shortages for basic food articles, and recessionary economic condition, WTO Director General Pascal Lamy warned about the dangers of rising protectionist pressures.

"A reinforced trading system is an essential anchor for economic stability and development," he said, arguing that the best way to achieve this is to conclude the Doha Development Round.

The WTO's latest report admitted that the initial growth projections of 6 per cent for last year went awry because of turbulence in the financial market and reduced demand in key industrialised countries, especially the US.

Developing countries, whose share of world merchandise trade reached a new record of 34 per cent last year, along with economies of the former Soviet Union, are expected to contribute more than a half of the global import growth in 2008.

The highlight of the world trade forecast is China which is yet to face any roadblock in its rapid trade growth. China is going to take away the lion's share in the economic and trade growth this year, while India would continue to have trade deficit with imports growing at a much rapid pace.

Last year, China's exports increased by 26 per cent with a total value of $1,218 billion, while India's exports grew by 20 per cent to reach a level of $145 billion. While China recorded 21 per cent growth in its imports last year, India's imports surged by 24 per cent, leaving the Middle Kingdom with a massive trade surplus of over $200 billion.

Consequently, China ranks second in the global exports and third in imports, while India does not figure among the first 30 exporters but ranks 18th in the imports' list.

Even in commercial services, which ought to have been the mainstay of India's export performance, the WTO's figures indicate vast disparities between the two Asian neighbours.

China, for example, is ranked seventh in global exports of commercial services while India is placed 11th. China ranks fifth in global imports of commercial services, while India has occupied the 13th position. India has a surplus of $8 billion in the overall trade in commercial services while China has a small deficit.