The downside of globalisation is that there is no such thing as decoupling: economic weakness spreads rapidly, creating a synchronised slump. The darkening outlook was highlighted by the US energy department’s prediction this week that global oil demand would shrink this year and next, the first back-to-back decline in 30 years. Meanwhile, mining giant Rio Tinto has ditched 14,0000 workers amid a restructuring effort to ease its debt burden, noting the “unprecedented rate of deterioration” in its markets.
A key aspect of the synchronised slump is falling trade as global demand ebbs. Chinese exports fell for the first time since 2001 last month – they tumbled from annual growth of 19% in October to –2.2% in November. South Korea’s November shipments declined by 18% and Taiwan’s were down 23%. The fall-off in Western demand has accelerated, with one major shipper recording a 12% annual decline in volumes in November alone, said Carl Mortishead in The Times. And now “intra-Asian trade is in freefall”, said Flemming Nielsen of Danske Bank. Taiwan’s exports to China plunged by a record 38.5% last month.
The slowdown in demand is being exacerbated by a shortage of trade finance – loans that underpin trade deals across the world – due to the credit crunch.
Global growth heads below zero
Given all this, it’s no wonder the World Bank is predicting the first contraction in global trade since 1982. This will “greatly aggravate” the worldwide downturn, said Gary Duncan in The Times. 2009 will see global GDP growth of just 0.9%, the weakest since records began in 1970, said the World Bank – and policymakers should be prepared for the worst-case scenario: for the first time since the war, global GDP could actually shrink. New car sales fell by an annual 37% last month