Open economies to face global crisis

In the face of the first global economic crisis, international trade is in sharp decline. World Trade Organization (WTO) economists forecast trade to fall by 9 percent in volume terms this year, the biggest contraction of global trade since the end of World War II.

The main explanation for this contraction is the simultaneous reduction in demand across all major economies of the world. This weakness has not spared even the vibrant economies of countries like China, with its growth for this year forecast to fall to the lowest level in nearly two decades.

Trade finance, which greases the wheels of international trade, has become more scarce and even when it is available it is much more expensive. This drying up of liquidity is contributing to the contraction of trade.