WTO head Pascal Lamy (Photo: Reuters)
The World Trade Organization (WTO) on Friday slashed its 2012 global trade outlook, citing the eurozone debt crisis and weak growth in the US and China as key factors behind the downgrade.
Global trade is now expected to grow 2.5 per cent in 2012 compared with a previous forecast of 3.7 per cent, the WTO said in a statement released in Singapore.
It also cut its global trade growth outlook for next year to 4.5 per cent from 5.6 per cent.
"The global economy has encountered increasingly strong headwinds since the last WTO Secretariat forecast was issued," the WTO said.
"Output and employment data in the United States have continued to disappoint, while purchasing managers' indices and industrial production figures in China point to slower growth in the world's largest exporter.
"More importantly, the European sovereign debt crisis has not abated, making fiscal adjustment in the peripheral euro area economies more painful and stoking volatility."
In April the WTO had warned that world trade growth, which slowed to 5.0 percent in 2011 after a big rebound of 14.0 percent in 2010, would weaken again this year.
Director-general Pascal Lamy called for more to be done to boost global growth, on top of recent measures to to buy up government bonds announced by the central banks of the United States, Europe and Japan.
"In an increasingly interdependent world, economic shocks in one region can quickly spread to others," he said in the statement.
"Recently announced measures to reinforce the euro and boost growth in the United States are therefore extremely welcome.
"But more needs to be done. We need a renewed commitment to revitalise the multilateral trading system which can restore economic certainty at a time when it is badly needed."
The WTO's revised projections for 2012 came as data showed global trade volume grew just 0.3 per cent in the second quarter, significantly slower than the 1.2 per cent seen in the previous three months.
Lamy, speaking at a press conference in Singapore, said the WTO's revised trade outlook should not come as a surprise given the strains facing the global economy.
"The main reason for growth slowing down is being of course Europe where growth is slowing. But not only Europe, we also know that US is lower than expected," said Lamy.
"So (it is) a substantial downward revision but in many ways unsurprising given what we know about the world economic outlook and the fact that world growth is slowing down more than we expected some months ago," he added.