The sluggish recovery of the global economy has been an uncomfortable but unavoidable reality for internationally-facing businesses throughout 2016, with worldwide trading conditions stubbornly continuing to return to the robust growth seen prior to the 2008 financial crisis.
A number of global bodies, including the World Trade Organization (WTO) and the Organisation for Economic Co-operation and Development, have published reports in recent months highlighting this ongoing problem, with the International Monetary Fund (IMF) having also shed light on the issue in its most recent World Economic Outlook.
According to the IMF's analysis, it is likely that recent economic difficulties will persist for the rest of the year and throughout 2017, with global governments urged to pledge their renewed commitment to increased trade integration as a means of overcoming them.
The October 2016 IMF World Economic Outlook's headline figures indicate that the world economy will expand by only 3.1 per cent this year, an underwhelming prediction fuelled by a recent slowdown experienced by the US economy, as well as the ongoing uncertainty and political turmoil caused by the UK's vote to leave the European Union.
Growth is expected to increase in 2017, but only slightly, with a prediction of a 3.4 per cent rate of expansion attributed more to the improvements seen in emerging market nations, such as Russia and Brazil, rather than due to any confidence that developed countries will be able to generate a substantial turnaround.
Indeed, advanced economies are expected to expand by just 1.6 per cent in 2016, less than last year's 2.1 per cent pace and down from the July forecast of 1.8 per cent. This underlines the fact that the global recovery remains in a weak and precarious state.
IMF chief economist and economic counselor Maurice Obstfeld said: "Taken as a whole, the world economy has moved sideways. We have slightly marked down 2016 growth prospects for advanced economies while marking up those in the rest of the world."
A rise in protectionist sentiments
These trends would be problematic enough on their own, but a further issue that is complicating the outlook for international businesses is the recent proliferation of populist anti-free trade sentiments in many countries.
The resurgence in protectionist views has put the progress of major trade deals such as the Trans-Pacific Partnership, the Transatlantic Trade and Investment Partnership, and the EU-Canada Comprehensive Economic and Trade Agreement in jeopardy, while a lack of new global policy initiatives to further reduce trade costs has been accompanied by a gradual rise in non-tariff barriers since the global financial crisis.
Anti-free trade sentiments expressed by US presidential candidate Donald Trump and the ongoing uncertainty surrounding the UK's decision to leave the European Union are likely to heighten anxiety about this problem becoming more entrenched.
Mr Obstfeld said: "It is vitally important to defend the prospects for increasing trade integration. Turning back the clock on trade can only deepen and prolong the world economy's current doldrums."
Recommended focus areas for further trade liberalization
To address the current issues facing the global economy, the IMF has recommended a number of trade-related measures to help bolster economic activity and grease the wheels of international commerce.
As well as resisting the re-emergence of all forms of protectionism and dismantling remaining barriers to trade, international governments have been urged to take action on a number of key issues, including:
- making cuts to trade tariffs in cases where they remain elevated
- ratifying and fully implementing commitments made under the WTO's Trade Facilitation Agreement
- devising a new forward-looking global trade strategy to follow the Doha round of WTO negotiations
- implementing reforms relating to regulatory cooperation, barriers to trade in services, and complementarities between cross-border investment and trade
In taking these and other steps, the IMF is hoping that the world's governments will be able to kickstart growth on a global basis, with a renewed commitment to free and open trade between international partners at the heart of this movement.