WTO scales down growth forecasts after global headwinds

World trade is expected to grow at 5.8% this year as compared to a smart expansion of 14.1% in 2011, as the global economy has been gripped by US credit downgrade and turmoil in the financial markets, WTO said today.

Earlier, the World Trade Organsiation had estimated the global commerce to grow by 6.5% in volume terms.

"Downside risks to GDP have certainly intensified in the last few months, and where output goes trade tends to follow. The situation in Greece is injecting considerable uncertainty into the economic environment.

"The economy may be at an inflection point where growth could pick up if policy makers devise a solution to the debt crisis that restores confidence in the financial system..." the WTO latest report said.

The damage to the developed world is likely to be much more pronounced than to the developing countries.

Developed economies' exports are expected to rise by 3.7% and their output to go up by 1.5%. Shipments from developing economies are estimated to increase by 8.5% and GDP by 5.9%.

"The member countries must remain vigilant," WTO Director General Pascal Lamy said.

However, there still remains some "upside potential" the WTO report said.

Disappointing output and employment data have damaged business and consumer confidence and contributed to the recent turmoil in financial markets.