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World trade as measured by volume of world imports is still decreasing and lagging behind world GDP, which is instead growing at around 2.5% on an annual basis. This is the second consecutive quarter in which world trade is shrinking, creating a divergence which had not been previously recorded since the CPB Netherlands bureau for economic policy analysis started measuring world trade in the early 1990s.

Raoul Leering, head of ING’s international trade research who compiled the study “A perfect storm for world trade?” tells GTR that the factors contributing to this exceptional scenario come from both a supply and a demand side. “We have seen some supply problems in important regions of the world which have been pushing down industrial production,” he says, referring specifically to port strikes and adverse weather conditions in the US, longer New Year’s holidays in China in the first quarter of 2015 as well as lagging industrial production, and slow growth in the eurozone. “Those are three big economic regions playing a big role in world trade, and all three showing a weak industrial production development. Goods are still dominant in world trade and industry is even more important to world trade than to world GDP,” continues Leering.

The fall in commodity prices has also had a negative impact on world trade volumes. The previous ING report, released in April, indicated that world trade would pick up thanks to increase demand for imported goods coming from the middle classes in emerging economies, but that has not happened to the extent desired. “We don’t see that now because income growth in many emerging markets is under downward pressure due to the collapse of commodity prices. This will only be apparent once growth is restored in Brazil and Russia, [although] India is a positive exception,” says Leering.

According to him, the economic downturn in Brazil and Russia will also negatively affect trade finance in the short term. “If we limit emerging markets to the BRIC countries, they won’t be such a big push for world import and export and export finance as they were a couple of years ago. From a trade finance point of view, for the BRIC countries, the picture is not as good as the picture of world trade growth,” he says.

The report concludes with an optimistic outlook for the future, expecting world trade to grow 20% faster than world GDP in 2016. This will be spurred both by China’s economic rebound in Q4 and industrial growth in the Eurozone. The most important factor will be trade itself. “Trade deals like the Trans-Pacific Partnership represent a big stimulus. We are optimistic because the fundamental drivers behind world trade are not over and out. They won’t be as high as the years running up to the crisis, but we don’t see enough evidence to assume that world trade will stagnate for a long time,” says Leering.