The World Trade Organisation, WTO, has issued a strong upward revision to their 2017 trade expansion forecast, following a sharp rise in global trade growth in the first half of the current year.

The growth estimate for global merchandise trade volume in 2017 was raised to 3.6 percent while the previous estimate for 2017 was 2.4 percent. This figure was set within a range of 1.8 to 3.6 percent, reflecting a high level of economic and policy uncertainty. The new estimate focusses on the top end of that range while a growth of 3.6 percent would represent a substantial improvement on the lacklustre 1.3 percent increase in 2016.

To reflect the continued forecast risk arising from deep uncertainty about near-term economic and policy developments, the range of estimates for world trade growth has been adjusted to between 3.2 and 3.9 percent while stronger growth in 2017 was attributed to a resurgence in Asian trade flows, as intra-regional shipments picked up and import demand in North America recovered after stalling in 2016.

"The improved outlook for trade is welcome news, but substantial risks that threaten the world economy remain in place and could easily undermine any trade recovery," said Roberto Azevedo, Director-General of the WTO. "These risks include the possibility that protectionist rhetoric translates into restrictive trade actions, as well as the worrying rise in global geopolitical tensions and the rising economic toll from natural disasters," he added.

The new estimate for world trade growth in 2017, at 1.8 to 3.6 percent, is at the high end of the range of estimates provided by WTO economists in their most recent trade forecast on 12th April, 2017. The strength of the revision is partly due to a modest improvement in the consensus forecast for world GDP growth, at 2.8 percent in 2017 for market exchange rates, up from 2.3 percent in 2016, and partly due to the composition of that growth.

Stronger growth, particularly in China and the United States, US, has boosted demand for imports, which spurred intra-Asia-trade as demand was transmitted through regional supply chains. Chinese demand in the first half of 2017 was driven by solid industrial growth, up 6.4 percent in real terms for the current year, and an even stronger growth in services, up 7.7 percent over the same period. Financial conditions in Asia have also improved compared to the volatile first quarter of 2016, contributing to business and consumer confidence.

The partial recovery of oil prices in 2017 also appears to have provided some support for investments in the US, whose growth slowed abruptly in 2016, particularly in the energy sector but has picked up in the first half of this year. The import content of investments tend to be higher than other components of GDP, so a recovery in expenditure in this area is expected to have a disproportionate impact on import demand.