Delta Economics is forecasting that world merchandise trade will grow by just over 1% in 2014. This is lower than its previous forecast, released in December 2013 of 1.7% and substantially lower than the World Trade Organisation’s forecast of 4.5% world trade growth for 2014. While at a country level, there are some positive growth stories, trade in 2014 is likely to be lower than trade in 2013 and this is dampening our global growth forecast.

The lower global forecast also reflects several things:

  • The effects of geo-political crises (specifically Russia’s annexation of the Ukraine which has created market uncertainty and raised the threat of sanctions, higher oil prices and slower economic growth because of constrained investment.
  • The effects of deflationary pressures in Europe and Asia which have already evident in the nominal values of trade for 2012 and 2013.
  • Lower actual trade growth in 2013 than was anticipated.
  • Forecast South-South trade growth of 5% during 2014

North America

Our regional forecast for 2014 export growth has dropped from 2.8% in Q4 2013 to 1.6% now. The United States will see its exports grow by a forecast 3% in 2014 which, compared to a net drop in Canada of -2.5% is positive. Its imports are forecast to shrink by around 1.9% during the course of 2014 and this reflects the reduced dependency that it has for imports on intermediate goods, particularly originating in China. Compared to Mexico, its drop is relatively small compared to 2013 (just 0.7%) suggesting a positive outlook for economic growth more generally. Mexico’s drop in forecast export growth reflects its status as an emerging economy and its dependency on trade with Canada and China in particular. All emerging economies at present are experiencing downward pressure on prices in order to remain competitive and this is reflected in the forecasts as well. Mexico is no exception.

Latin America

Latin America’s export trade is growing but the drop in the forecast is a function of declines the outlook for trade in 2014 compared to 2013. In particular, the forecast for Brazil in 2014 is 7.5% compared to growth of 8.6% in 2013 and for countries like Peru the drop is even larger, from 8.5% to 6.5% growth. The region is currently prone to political instability and the slow down in exports is a function of this alongside restrictive import policies that have been followed through by some countries, like Argentina. As a result, imports are also forecast to drop. There are two drivers of Latin American trade: demand for copper and oil in emerging Asia in particular and its role in global supply chains. If China’s slowdown becomes a hard-landing, copper exports to China from Brazil and Peru in particular will be threatened and this in itself can explain the drop in the forecast. However, the uncertainty in markets, particularly recently triggered by Venezuela’s decision to halt economic relations with Panama and by Argentina’s economic mismanagement, has also caused our forecast to be downgraded rapidly over the past few months, from 7.2% in our Q4 2013 forecast to 3.6% now.


Europe’s trade is forecast at best to be flat in 2014, which is a mild improvement on an estimated slight drop in 2013 and all countries are forecast to be seeing slower export growth compared to 2013. Some of the peripheral countries, Portugal and Greece in particular, are still growing significantly above the European average, but the large drop in Germany’s export growth forecast for 2014 is worrying and arguably reflects its dependency on Chinese growth. Ireland has to some extent grown its way out of crisis through Foreign Direct Investment led export growth, but again this is forecast to slow during 2014. Growth in “emerging Europe” (particularly Poland) is robust suggesting that the region’s supply chains are strong and that Poland, Bulgaria (3.2% export growth in 2014) and Romania (4% export growth in 2014) are taking over from some of the emerging countries in Asia as drivers of intermediate manufacturing within Europe.

Asia Pacific

Most obvious declines in estimated and forecast trade are in China, Japan and Australia in Asia. Australia is highly dependent on China as an export partner, particularly for its iron ore and coal and, as China’s infrastructure construction boom slows and China’s economic growth also slows, Australia’s forecast export growth is also expected to fall. Japan’s export trade has failed to pick up despite the devaluation of the Yen against the US Dollar and this trend is likely to continue into 2014 with exports pretty much static compared to a mild growth in 2013.