World trade set for ‘biggest contraction since WWII’: WTO

GENEVA, (AFP) - The World Trade Organisation said Monday that global trade would show its biggest fall since World War II this year due to the financial crisis, with a 9.0-per cent contraction expected.
“The collapse in global demand brought on by the biggest economic downturn in decades will drive exports down by roughly nine per cent in volume terms in 2009, the biggest such contraction since the Second World War,” the forecast said.
Trading volumes of the developed economies would contract 10 per cent this year, while trade in developing economies should slip 2 - 3 per cent.
Despite the dismal projections for the full year, the WTO pointed out that import data for China, Singapore, Taiwan and Vietnam turned positive in February following successive months of decline.
China posted an increase of 17 per cent in imports compared to January, while Singapore posted growth of one per cent.
“While this is only a single month of data, and should therefore be interpreted cautiously, it could be evidence of slowing decline and perhaps a ‘bottoming out’ of negative trade growth trends,” said the report.
In Vietnam, February imports were up 32 per cent compared to January, which in turn was down 38 per cent from December 2008.
February imports in Taiwan gained 22 per cent over January, a sharp reversal from the 24 per cent fall in January compared to December.
Year-on-year comparisons of trade data are usually deemed more accurate as they factor in seasonal effects such as festive holidays.
But in this instance, after consecutive months of sharp decline, the data might reveal a turning point.
In 2008, world trade growth reached 2 per cent, but it “tapered off in the last six months,” said the WTO.
The WTO added that it was “implausible” that trade volumes could continue to fall at the rate they have been declining in the past few months.
Citing China as an example, the WTO noted that if the downturn were extrapolated according to recent export figures, then “China’s exports would be approaching zero within ten months to a year”.
“This is obviously a highly implausible scenario and emphasises the reality that such steep declines as those we have witnessed recently will not persist,” it said.
Nevertheless, the WTO warned of “substantial downside risks” to the overall projection.
Further adverse developments in the financial markets could prolong the crisis. Protectionism could also hurt world trade, it added.
In 2008, Germany unseated China as the world’s biggest exporter, with 1.465 trillion dollars of exports in 2008.

Sri Lanka kicks off 2009 with lower exports, imports in January

Sri Lanka began 2009 with its external trade shrinking in an unprecedented manner in January.

* Exports down 11.6% to $ 491 m; Imports plunge by 40.5% to $ 699 m over 2008
* Foreign Remittances down by over 6% to $ 274 million but was 123% of the trade deficit, easing the pressure on the current account balance While exports decreased by 11.6 per cent to US dollars 491 million in January 2009, imports decreased by 40.5 per cent, to US dollars 699 million. Both, the agriculture and industrial sectors, which were affected by the decline in commodity prices, contributed to the reduction in growth in export earnings. The lower demand emanating from the global economic downturn also had an impact on the export volumes. The decline in agricultural exports, contributed to more than 50 per cent of the decline in exports in January 2009. The prices of tea and rubber have decreased by 9.7 per cent and 45.9 per cent, respectively. However, the performance in the exports of textiles and garments is encouraging as it grew by 4.5 per cent, despite reduced external demand. However, this was not sufficient to fully compensate the depressed performance of the other subsectors within the industrial sector. Overall, industrial exports have declined by 5.2 per cent to US dollars 385 million.
Expenditure on imports declined by 40.5 per cent to US dollars 699 million in January, 2009. The broad-based decline in imports was led by petroleum, contributing more than 40 per cent to this decline. The average price of crude oil imports declined by 55 per cent to US dollars 41.71 per barrel in January, 2009, from US dollars 92.71 per barrel in January 2008. Expenditure on investment and consumer goods has also declined by 42.1 per cent and 23.6 per cent, respectively in January 2009.
The current trend in external trade is likely to prevail throughout a greater part of 2009, in response to the deepening global economic crisis.
Trade deficit contracted by 66.5 per cent, in January 2009, year-on-year, to US dollars 208 million, led by lower trade volumes.
Private remittances decreased by 6.6 per cent from US dollars 274 million recorded in January 2008 to US dollars 256 million in January 2009. A considerable part of remittances are denominated in UK pounds, euro, Australian dollar and Korean won, all of which have depreciated sharply against the US dollar, contributing to the decline in remittances in US dollar terms. Remittances in January have been 123 per cent of the trade deficit, easing the pressure on the current account balance. In consideration of these developments, both current and expected, the margin deposit requirements (100 per cent) on certain non-essential imports imposed in October 2008 were removed, while reducing the same (from 200 per cent to 100 per cent) on certain categories of motor vehicles. This trend is expected to continue throughout the year, leading to much lower trade and current account deficits in 2009, easing the pressure on the foreign exchange market.
The gross official reserves, with and without Asian Clearing Union (ACU) funds, recorded US dollars 1,703 million and US dollars 1,415 million respectively, by end January 2009. Based on the previous 12 month average imports (US dollars 1,128 million per month), these reserve values are equivalent to 1.5 and 1.3 months of imports, respectively. However, in view of the current and expected low imports, resulting from the sharp reduction in the oil and petroleum product import bills, the actual number of months of imports is much higher.