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Growth in the global trade is likely to be slower in the current year and the trend may continue in the next year. Escalation of trade tensions coupled with a squeeze in the credit markets is the main reason for the predicted slowdown. These are the core messages of the latest world trade outlook of the World Trade Organisation (WTO), which was released at the end of September this year.
The multilateral trade body is now anticipating that global merchandise trade volume will grow at 3.9 per cent in 2018 and the rate will fall further to 3.7 per cent in 2019. Six months back, on April this year, the organisation predicted that global trade would grow by 4.4 per cent in the current year as against 4.7 per cent in 2017. The emergence of trade frictions among the big countries was already there. So, the WTO had estimated a lower rate of trade growth at that time. Since then, situation has not improved at all, compelling the Geneva-based organisation to further downgrade the trade growth forecast in terms of volume.
During the last six months, the United States (US) imposed higher tariffs on Chinese goods and China also retaliated. Even emerging economies like India enhanced its import tariff on a number of products. Thus the trade war gains ground. Moreover, global financial market is also facing some volatility due to monetary tightening by developed countries. This may cause a reduction in trade finance. In such a fractious situation, it is predictable that world trade will not take off on a higher trajectory this year.
A gloomy outlook on global trade has a crucial implication for Bangladesh as its economic advancement significantly depends on external trade. In the past fiscal year (FY18), the country's export increased by only 5.81 per cent and stood at $36.68 billion. But the Seventh Five-Year Plan (7FYP) projected 12 per cent growth with $42 billion export earnings. A big gap between the projected and actual export earnings expose the country's under-performance in this regard.
For the current fiscal year (FY19), the government itself set the annual export target at $39 billion which is also significantly lower than the 7FYP-projected figure of $47.50 billion. Though the government took the growing global trade tension into consideration, the latest outlook of the WTO comes as an additional disappointment.
Bangladesh exports its goods mainly to the US and the European Union (EU). China is the number one target of trade war initiated by the US. Until now there is no sign that Bangladeshi major exportable items, the Ready-Made Garments (RMG) to be precise, will face any additional restriction in the US market. This product is already facing higher tariff. If small countries like Bangladesh are not feeling the heat of trade war yet, they may suffer on account of non-tariff barriers.
Moreover, the WTO has already identified that trade-related indicators are losing momentum, on top of declining global export orders and economic policy uncertainty. Fall in export orders will put pressure on Bangladeshi export-oriented manufacturers. It may also reduce the overall export earnings in the near future.