BAGSVÆRD: A continued slowdown in global growth, as well as a lower trade multiplier will reduce overall demand for shipping for the rest of this year and through 2020.
The World Trade Organization (WTO) has substantially lowered its forecast for trade volumes growth in 2019, putting numbers to the slowdown that is already being felt by the shipping industry. Global growth is now expected at just 1.2%, compared with the 2.6% that had been forecast in the April report. This would represent the lowest growth in trade volumes since 2009.
Expectations for global trade growth have also been lowered for 2020; this is now forecast at 2.7%, down from 3%. The WTO cautions that risks to these forecasts are weighted to the downside, with these risks including a potential deepening of trade tensions, financial volatility and rising geopolitical tensions in many regions of the world.
World goods trade grew by only 0.6% in the first half of 2019, with the WTO expecting a slight recovery in the second half of the year in order for volumes to reach the projected growth of 1.2%, which reflects normal seasonality from a shipping perspective.
Imports by developed countries are expected to grow by only 1.6% in 2019, down from 2.5% in 2018. Growth in imports by developing nations is also expected to fall back, from 4.1% in 2018 to just 1.1% in 2019, which will be the first time since 2016 that growth in imports by developing nations is lower than those by developed nations. But while growth in imports by developing nations is expected to recover in 2020, to 4.3%, import growth in developed nations is expected to continue to slow into 2020, reaching only 1.2%.
The US and China are rumoured to be nearing an agreement on phase one of a deal ¬– whatever that means – which, if signed, could ease tensions, reducing the risk of a further escalation of the trade war. We have, however, been in a similar situation several times before over the past year, and although the current tariff delays are good news for trade volumes, BIMCO remains concerned that this trade war may continue to drag on into 2020 and, potentially, beyond. Even if a phase one deal can be signed, the hardest parts of an agreement are yet to be worked on.
Furthermore, after a WTO ruling on aid given to Airbus, the US has imposed higher tariffs on USD 7.5 billion worth of EU goods, further worsening global trading relationships. BIMCO reiterates that raising tariffs is bad not only for the economies directly involved, and shipping between them, but also for the global economy and trade as a whole.