The World Trade Organization slashed its forecast for trade growth in 2013 on Wednesday, saying it feared protectionism was on the increase. It cut its forecast for global trade growth in 2013 to 3.3 percent from 4.5 percent and said trade grew only 2.0 percent in 2012.
Slowing global trade according to experts will make it difficult for India to tide over the problems concerning widening current account deficit.
"World trade growth fell to 2 per cent in 2012 — down from 5.2 per cent in 2011 — and is expected to remain sluggish in 2013 at around 3.3 per cent as the economic slowdown in Europe continues to suppress global import demand," a World Trade Organisation (WTO) statement posted on its website said.
WTO Director-General Pascal lamy said the events of 2012 should serve as a reminder that the structural flaws in economies that were revealed by the crisis have not been fully addressed, despite important progress in some areas.
"Repairing these fissures needs to be the priority for 2013," lamy added.
It said that improved economic prospects for the US in 2013 should only partly offset the continued weakness in the EU, whose economy is expected to remain flat or even contract slightly this year according to consensus estimates.
China's growth should continue to outpace other leading economies, cushioning the slowdown, but exports will still be constrained by weak demand in Europe. As a result, 2013 looks to be a near repeat of 2012, with both trade and output expanding slowly, it said.
"As long as global economic weakness persists, protectionist pressure will build and could eventually become overwhelming. The threat of protectionism may be greater now than at any time since the start of the crisis, since other polices to restore growth have been tried and found wanting," lamy said.
In September 2012, the WTO had forecast that the world trade would expand by 4.5 per cent in 2013.
Further, it said thatdeveloping countries and the Commonwealth of Independent States collectively raised their output by 4.7 per
cent in 2012. India recorded a 5.2 per cent increase.
"Contributing to the slow growth in Asia were India and Japan, where exports declined by 0.5 per cent and 1 per cent, respectively," it added.
During the April-February period, India's exports declined by 4 per cent to $265.95 billion. Imports during the period grew by a mere 0.25 per cent to $ 448 billion, leaving a trade deficit of $182.1 billion.
Current Account Deficit (CAD), which is the difference between inflow and outflow of foreign currency, has touched a historic high of 6.7 per cent of the GDP in quarter ending December. On prospects for 2013 and 2014, the WTO said the outlookfor world trade and output looks unsettled, as positive economic trends have also been accompanied by more worrisome developments.
It said that the current forecast could be derailed if certain downside risks materialise. "These include revived financial market turbulence related to the euro crisis, commodity price spikes, geopolitical tensions, and rising protectionism," it added.