WTO slashes forecast for trade growth as conflicts mount

The WTO said that conflicts between the United States and China could weigh on global trade. Above, a woman looks at toys made in China at a store in Los Angeles, California on September 13, 2019. (AFP)
Updated 01 October 2019

WTO slashes forecast for trade growth as conflicts mount

  • ‘Trade conflicts pose the biggest downside risk to the forecast but macroeconomic shocks and financial volatility are also potential triggers for a steeper downturn’

BRUSSELS/BERLIN: The World Trade Organization cut its forecast for growth in global trade this year by more than half on Tuesday and said further rounds of tariffs and retaliation, a slowing economy and a disorderly Brexit could squeeze it even more.

The WTO said it now expected global merchandise trade to increase by 1.2 percent this year, compared with its April estimate of 2.6 percent. That growth was 3.0 percent in 2018. For 2020, growth 2.7 percent is forecast, down from a previous estimate of 3.0 percent.

“The darkening outlook for trade is discouraging, but not unexpected,” WTO Director-General Roberto Azevedo said in a statement, urging WTO members to resolve trade disagreements and cooperate to reform the WTO.

The Geneva-based body said its reduced forecasts reflected estimates for slower expansion of the global economy, partly due to trade tensions, but also because of cyclical and structural factors and, in Europe, Brexit-related uncertainty.

The WTO gave a forecast range for trade growth this year of 0.5 percent to 1.6 percent and for 2020 of 1.7 percent to 3.7 percent, with the upper end of the ranges reachable if trade tensions eased.

“Risks to the forecast are heavily weighted to the downside and dominated by trade policy,” the WTO said.

The United States and China have been locked in a trade war for over a year. They have levied punitive duties on hundreds of billions of dollars of each other’s goods, roiling financial markets and threatening global growth.

US President Donald Trump has also imposed tariffs on products from other countries, notably on steel and aluminum, in a bid to cut the trade deficit of the world’s largest economy. The WTO figures implied he had had limited success.

The WTO said on Tuesday that North America showed the fastest growth of exports of any region in the first half of the year, at 1.4 percent, although the rise of imports into North America were also greater than elsewhere, at 1.8 percent.


Sharjah sells $1bn sukuk

Updated 03 June 2020

Sharjah sells $1bn sukuk

  • Gulf states seek to bolster finances hit by pandemic and historic slide in oil prices

DUBAI: Sharjah, the third-largest emirate of the UAE, sold $1 billion in seven-year sukuk, or Islamic bonds, on Tuesday, according to a document from one of the banks arranging the deal.

The debt sale comes as several governments in the Gulf seek to bolster their finances to face the economic fallout from the coronavirus pandemic and a historic slide in oil prices.

Sharjah set the final spread at 245 basis points (bps) over midswaps for the sukuk, which are Islamic sharia-compliant bonds, according to the document seen by Reuters.

It tightened the spread by 30 bps from where it began marketing the notes earlier on Tuesday.

Sharjah, rated Baa2 by Moody’s ratings agency and BBB by S&P, is a relatively frequent issuer of US dollar Islamic bonds.

HSBC was hired as global coordinator for the transaction. Other banks on the deal were Bank ABC, Dubai Islamic Bank, Gulf International Bank, Mashreqbank and Sharjah Islamic Bank.

In May, the emirate raised 2 billion dirhams ($545 million) in privately placed one-year sukuk to support its economy during the coronavirus pandemic, according to a statement by Bank of Sharjah, which arranged that deal.

“Issued as 12 month dirham-denominated paper in several tranches, the Sharjah Liquidity Support Mechanism (SLSM) sukuk represents the first rated short term local currency tradeable instrument in the UAE, which can be used for liquidity management by banks,” the Sharjah Finance Department said in a statement on Tuesday, confirming that deal. It said that it was a first tranche and that further tranches with one or more other banks were expected to expand the SLSM to 4 billion dirhams.

S&P Global Ratings in April revised its outlook on the emirate to negative from stable due to lower oil prices and the impact of the new coronavirus.

“Although we expect GDP growth to recover in 2021, lower-for-longer oil prices and a protracted lockdown period could pressure the emirate’s fiscal position,” the agency said.