| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 Asia Economy

Finfacts changes from 2015


How to use our RSS feed

Follow Finfacts on Twitter

Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.


Finfacts is Ireland's leading business information site and you are in its business news section.


Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Global Cost of Living

Irish Tax - Income/Corporate




Content Management by interactivetools.com.

News : Global Economy Last Updated: Feb 4, 2015 - 12:56 PM

World trade is growing slower than economy for first time in 40 years
By Michael Hennigan, Finfacts founder and editor
Nov 19, 2014 - 2:56 PM

Email this article
 Printer friendly page

World trade is growing slower than the global economy for first time in 40 years according to research by IMF and World Bank economists.

Trade grew by no more than 3% in 2012 and 2013, compared with the precrisis average of 7.1% according to an article in the December's issue of 'Finance & Development,' the IMF's monthly magazine.

The Financial Times says that many economists have blamed the recent slowdown in trade growth on the crisis and the economic malaise in the EU, arguing that once Europe bounced back so too would trade. The slowdown has also been attributed to a slower pace of trade liberalisation in recent years.

However, the economists, Cristina Constantinescu, Aaditya Mattoo, and Michele Ruta, from the IMF and World Bank argue that  much of the slowdown in trade growth is structural. For that reason, accelerating international trade is unlikely to be the same contributor to broader growth that it was in the past, they say.

The economists says that a look at the ratio of imports to GDP over the past 10 years suggests that there are longer-term components of the current trade slowdown. Although most economies recorded a stable ratio of imports to GDP after the crisis, this flatness in import shares appears to predate the crisis for China and the United States. For these two countries, import volumes as a share of real GDP have been roughly constant since 2005: a “Great Flatness” seems to have set in before the Great Recession, pointing to the presence of longer-term determinants of the global trade slowdown

They analyze the relationship between trade and income for the past four decades and find that the responsiveness of trade to income—what economists call the long-term trade elasticity to income—rose significantly in the 1990s but declined in the 2000s to the levels of the 1970s and early 1980s. In the 1990s, a 1% increase in global income was associated with a 2.2% increase in world trade.

"But this tendency for trade to grow more than twice as fast as GDP ended around the turn of the century. In the 2000s, a 1% increase in world income has been associated with only a 1.3% increase in world trade."

In the 1990s the development of global supply chains drove trade and while in 1993 material parts comprised 60% of China's imports, it is now down to 35%

"The lower share of imported parts and components in total exports does reflect the substitution of domestic inputs for foreign inputs by Chinese firms, a finding that is corroborated by evidence of increasing domestic value added in Chinese firms. But the increased domestic availability of inputs has been linked to foreign direct investment,"  Constantinescu, Mattoo, and Ruta say and conclude: that the structural development may "affect the growth potential of the world economy because trade and income are not independent of one another."

Related Articles

© Copyright 2015 by Finfacts.ie

Top of Page

Global Economy
Latest Headlines
Strong Swiss franc gloom deepens for exporters
Global investors shift focus to China; EM outflows surge to $1tn in 13 months
Global oil glut will continue into 2016
Stable growth momentum in OECD area but slowing expected in China
Prices for major food commodities in July lowest since September 2009
Global manufacturing in July weakest level in two years
US, China and UK lead top 25 target countries for foreign direct investment
Budget surpluses rare in developed countries from 1980s; Italy, France, Greece had none in 60 and 40 years
Singapore, London and Shanghai top cities for new FDI projects in 2014; Dublin in 11th place
Exchange rates shuffle as Dublin ranked 49th most expensive city; Paris at 46; Berlin at 105
Western consumer groups under pressure in China and India
Developing countries facing “structural slowdown” likely to last for years
OECD BEPS Tax Project: Amazon books UK sales in UK; Australia proposes up to 100% in penalties
Emerging Markets Index falls to 12-month low in May as manufacturing contracts
US and world economies slowing in 2015 — OECD
Global manufacturing production rose slightly in May; Trade flows weak
GDP growth in OECD area slowed to 0.3% in the first quarter of 2015
Only one quarter of workers worldwide have stable employment contracts
Automatic Exchange of Tax Information: OECD says countries won't be able to game system
Gates Foundation loses in Swiss family's shares coup
Minimum wage levels in OECD countries
Brent oil benchmark over $68 a barrel - up almost 50% in 2015
Global growth slows and manufacturing dips to 21-month low
Family-controlled firms dominate European business
Top 10 of world’s 250 largest consumer products companies account for 30% of sales
Nine of world's 20 fastest growing economies in Africa
Globalisation maybe stalling as trade growth remains weak
Global growth prospects uneven across major economies says IMF
Emerging markets growth lowest since 2009; Global growth at 30-year average
China's economic rebalancing hitting Latin American economies
New York, London, HK & Singapore top global financial centres index; Dublin recovers
Global growth in modest expansion from low oil prices/ monetary easing says OECD
Composite leading indicators point to positive change in growth momentum in the Eurozone
Global labour market trends portend paradise for some but uncertainty for many workers
Vienna remains top of World Quality of Living Rankings in 2015; Dublin at 34
Zurich and Geneva overtake Singapore to become world's most expensive cities
HSBC Switzerland and Falciani: How it happened
Global economic power to continue shift from advanced economies
Global food price index falls in January; Cereal output set for record
Global debt has risen $57tn or 17% of world GDP since 2007