“Members must remain vigilant. This is not the time for go-it-alone measures. This is the time to strengthen and preserve the global trading system so that it keeps performing this vital function in the future,” warned Pascal Lamy, director-general of the WTO, in a statement.
Trade volumes in developed economies are now projected to grow by 3.7 percent for 2011, as opposed to the 4.5 percent predicted in April.
For developing economies, full year trade growth is expected to reach 8.5 percent, down from the earlier forecast of 9.5 percent.
WTO economists said that since their previous forecast, “developed economies in particular have been buffeted by strong headwinds, including the lingering effects of the earthquake and tsunami in Japan, the prolonged budget impasse and credit downgrade in the United States, and the ongoing euro area sovereign debt crisis.”
Poor output and employment data have also hammered consumer confidence and contributed to the turmoil in the financial markets.
The economists also warned that the current forecast still carries “an unusually high degree of uncertainty” as it is made on the assumption that trade would slow down instead of declining drastically.
On the upside, the economy may see a pick up in growth if policymakers are able to find credible solutions to the debt crisis.
“On the other hand, policy missteps could trigger wider instability along the lines of the crisis that followed the failure of Lehman Brothers in 2008,” it said.
“Weighing these factors, we believe that risks to the forecast are firmly rooted on the downside but we should not ignore the fact that there is some upside potential,” it warned.