At a time when Pakistan's exports have tended to decline and current account deficit has risen substantially, Geneva-based World Trade Organisation's (WTO) latest outlook is certain to compound the difficulties of the country. According to its forecasts released on 23rd September, 2014, global commerce is now set to expand by 3.1 percent this year, much less than the 4.6 percent forecast made in April, 2014. Forecast for trade growth in 2015 has also been downgraded to 4.0 percent from 5.3 percent. WTO Chief Roberto Azevedo stated that "international institutions have significantly revised their GDP forecasts after a disappointing economic growth in the first half of the year" and this had negatively impacted the WTO forecasts for 2014 and 2015. Weaker-than-expected GDP growth and muted import demand in the first half of 2014 coupled with uneven growth and continuing geopolitical tensions in the second half of the year were the major risks for world trade, commerce and output.
The latest forecasts of WTO about the growth in world trade and commerce, though distressing, seem to be based on some solid evidence. Growth and import demand is already muted, in particular, in natural resource exporting regions such as South and Central America. There are also sluggish economic performances in the US and Germany which have sapped global import demand. Tensions over the Ukraine crisis have pitted the European Union and the US against Russia and the resultant tit-for-tat trade measures have adversely affected trading in agricultural commodities. A growing conflict in the Middle East is stoking uncertainty which could lead to a spike in oil prices if the security of supplies is threatened. Besides, the Ebola outbreak raging in West Africa has sown panic and diminished economic prospects in the region and potentially beyond. It is obvious that the combination of so many adverse factors is bound to cause damage to various economies, reduce global demand and constrain the growth of trade and commerce in major economies of the world.
Unfortunately, however, the world leaders who have a duty to provide succour in such an undesirable situation are not fully prepared to cooperate and let the world trade flourish in a free and unconstrained environment. The 160 economies which make up the WTO are supposed to set trade rules in an attempt to ensure a level-playing field and spur growth by opening markets and removing trade barriers, including subsidies, excessive taxes and regulations. However, they have failed repeatedly to conclude the Doha Round of trade liberalisation launched in 2001 with the stated aim of maximising world trade and output. In the latest round of talks when all the countries seemed closer than ever to clinch a deal on opening world trade, India did not agree on the pretext that it may be allowed to retain subsidies on food and agricultural sector. Such a stand is obviously taken by the Modi government purely on political grounds and has nothing to do with economic principles. Anyhow, if a proper understanding is not reached in the Doha Round, there is every possibility of growing protectionism and regional trade blocs which would further undermine the global prospects for growth and trade expansion.
Pakistan's economy is likely to be hit severely by such an adverse development. There are already a host of factors like acute energy shortages, political impasse, military operation in North Waziristan and floods in large parts of the country which have reduced the prospects of growth and contributed to a decline in exports despite some favourable concessions from the EU. A drastic fall in FDI and a lower economic activity must have also increased unemployment, poverty and the level of misery in the country. The awakening of the masses by speeches of Imran Khan and Dr Tahirul Qadri could lead to political and social tensions in the country. Unfortunately, however, these unfavourable factors, coming on the back of depressing WTO forecasts, would further depress the exports of the country and make the task of managing the external sector accounts much harder. Pakistan, of course, needs a robust global growth and vibrant world trade for the revival of its economy and improvement in balance of payments (BoP) position. Being a minor player in the world economy, however, the country cannot do much to change the prospects of world trade and commerce or play a major role in concluding the Doha Round but can only pray for better sense to prevail and improved performance of the global economy.
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