Weaker demand in the developed countries limited the expansion of international trade in 2007. Consequently, world merchandise exports grew in real terms (that is, at constant prices) by only 5.5 per cent, compared with 8.5 per cent in 2006.
There was lower import growth than in 2006 in North America, Europe, Japan and the net oil-importing developing countries in Asia. This downward trend outweighed the higher import growth in Central and South America, the Commonwealth of Independent States, Africa and the Middle East. It is estimated that the developing countries collectively accounted for more than half of the increase in world merchandise imports in 2007.
Among the leading traders, China's expansion in merchandise trade remained outstandingly strong in 2007 as lower export growth to the US and Japanese markets was largely offset by higher export growth to Europe and a boom in shipments to the net oil-exporting regions. Despite a booming domestic economy, import growth continued to lag behind export growth.
The slowdown in economic activity in developed countries was the major factor in the reduced expansion of global trade in 2007. The variation in real trade growth among regions remained large, reflecting marked differences in economic activity and relative price developments. Unsurprisingly, thanks to their faster income growth and increased international purchasing power, net exporters of mining products (fuels and minerals) recorded a double-digit rise in their imports, while exports tended to increase less than the global average.
Assuming global GDP growth of between 2.5 and 3 per cent in 2008, global merchandise trade could slow down to about 4.5 per cent, or about 1 percentage point less than in 2007. This pessimistic outlook is based primarily on adverse developments in the financial markets, the dramatic downturn in the US property market, the decline in inter-bank lending and the dwindling capitalisation of major stock markets.
Turmoil on financial markets not only affects US demand growth but also leads to lower economic growth for Japan and Western Europe. As world trade responds strongly to variations in global economic activity, a stronger than projected deceleration in world economic growth could cut trade growth much more sharply, to significantly less than 4.5 per cent.