Despite a sharp slowdown this year as emerging market (EM) demand stalled, businesses expect to see the West lead a tentative recovery in global trade that should broaden and accelerate over the medium term, reports HSBC.
Although the banking group’s global trade confidence score fell 4 points to 120 in the second half of 2015, the 64% of businesses surveyed still expect merchandise trade volumes to increase over the next six months.
Looking further ahead, HSBC’s global trade forecast sees import growth in the US and Europe laying the foundations for a moderate rebound that will gain pace as economic conditions in China stabilise.
“Trade has been hampered by a number of factors this year – from falling commodity prices and Chinese industrial output to the strength of the US dollar,” said Stuart Tait, head of global trade and receivables finance at HSBC.
“What’s interesting is that this recent subdued performance is more consistent with a period of economic recession than of recovery. But we’re not in a global recession, and this gives us reason to see this as a transitional downturn in which we’ve passed the lowest point.”
HSBC cites five global trends that will have a positive impact:
- The stabilisation of China’s economy.
- Stronger investment spending supporting solid growth of import demand in the developed markets.
- Cyclical recovery in key sectors.
- Trade liberalisation gaining traction.
- Expanding opportunities for growth in services trade
The report notes that despite the near-term challenges facing leading emerging markets, especially China and Brazil, many emerging economies benefit from strong economic fundamentals, which promise to be an important driver of global economic growth and trade over the medium-term. Asia’s economies are still expected to be the main drivers of global trade over the period, with ‘south-south’ flows representing the fastest-growing trade corridors.
Cyclical sectors such as transport equipment are expected to benefit most from the upturn in the near term, although intermediate inputs such as chemicals and machinery will increasingly benefit as global investment strengthens. The recovery will gradually boost demand for raw materials and mineral fuels, giving support to commodity prices and helping to expand trade further in value terms.
Moves towards trade liberalisation continue to hold the potential to provide an upside surprise for the performance of global trade, adds HSBC Notable progress at the World Trade Organisation (WTO) includes the pending ratification of the trade facilitation agreement and the completion of a draft agreement on expansion of the information technology agreement.
Moreover, at the regional level, conclusion of the draft agreement for the Trans-Pacific Partnership (TPP), is an important step towards the largest new trade pact in 20 years. These agreements are pertinent not only for merchandise trade, but also for services trade, which fell less sharply than trade in goods during the global crisis and experienced more robust growth since.
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