Japan External Trade Organization (JETRO)
With the world economy enjoying a stable real GDP growth rate of 4.1% in 1997, world trade in goods in terms of volume rose by 9.6% on the previous year, a substantial increase on the 6.2% growth rate posted in 1996 and just behind the 10.2% and 10.3% registered in 1994 and 1995, respectively (Table 1).
In terms of nominal export value, however, world trade in 1997 grew a moderate 3.4% on the previous year to US$5.46 trillion (Table 2-1). After posting double-digit growth of 13.8% and 19.7% in 1994 and 1995, respectively, growth in world trade in value slowed to 3.9% in 1996, and the increase in trade in 1997 remained at last year's 3% level.
Although there is now a wide gap between the volume and value-based growth rates, this is primarily due to the strong U.S. dollar, which causes the value of trade to shrink when converted from local currencies to U.S. dollars. In reality, world trade seems to have accelerated in 1997.
(1) The gap between volume and value-based growth rates increases as prices fluctuate, but in 1997, the gap was mainly due to the sharp appreciation of the U.S. dollar against other major currencies (Table 3), which had the effect of shrinking the value of trade when converted from local currencies. The world trade prices on an SDR basis fell 0.8% on the previous year in 1997, less than the 5.9% fall on a U.S. dollar basis. It may be surmised from this that in 1997, the impact of exchange rate fluctuations was greater than the fall in prices of commodities themselves.
(2) According to preliminary calculations made by JETRO using data on major currencies' proportions of world trade settlements and the value of trade in individual currencies, the figure for the actual value of world trade in 1997 is underestimated by US$229.4 billion-an amount equivalent to 4.2% of total world trade and approximately equal to the exports of the world's sixth largest exporter, Italy (US$238.2 billion in 1997)-due to the effects of exchange rate fluctuations (i.e. the appreciation of the U.S. dollar). Calculations based on the same set of assumptions for each year since 1990 show the effects of exchange rate fluctuations to have been greatest in 1997 (Table 4). Another reason for the slowdown in growth in terms of value was the weakness of oil and primary product prices due to the slump in demand in Asia caused by the currency crisis (Table 5). (3) World trade in services (based on exports) stood at a record high of US$1.30 trillion in 1997. However, year-on-year growth remained at just 2.0%, and the slowdown in growth seen in 1996 when growth was 6.0% continued. Although 70% of the value of world trade in services was accounted for by the developed countries, the Asian countries have recently shown remarkable growth. Despite the currency crisis, the WTO estimates growth in Asian exports of services in 1997 to have exceeded that for the world as a whole.