One year ago, economic forecasters were predicting above trend GDP growth in the United States and near trend growth in the euro area in 2014.    Both predictions promised to support stronger trade growth but neither materialized, as a mix of strong and weak quarterly results in the United States only produced average growth for the year, while activity in the euro area was consistently mediocre.

Geopolitical tensions and natural phenomena also weighed on trade growth last year.       The crisis in the Ukraine persisted throughout the year, straining trade relations between Russia on the one hand and the United States and European Union on the other.       Conflict in the Middle East also stoked regional instability, as did an outbreak of Ebola haemorrhagic fever in West Africa. Finally, declines in first quarter trade and output in the United States were attributed to unusually harsh winter weather.

The WTO's trade forecasts depend on GDP projections from other organizations, but these have been consistently overstated since the financial crisis of 2008-09, biasing our trade forecasts upward.

Recent surveys of business sentiment and activity point to a firming of the economic recovery in the European Union, moderating growth in the United States, and subdued activity in some economies, particularly Brazil and Russia.  These indicators are consistent with the current trade forecast, but WTO economists cautioned that the presence of several risk factors added to the uncertainty of their estimates.

The most prominent risk is the divergence of monetary policies in the United States and the euro zone, as the Federal Reserve contemplates raising interest rates later this year while the European Central Bank has just started its own programme of quantitative easing.     Others include a re- flaring of the debt crisis in the euro area, and a stronger-than-expected slowdown in emerging markets (particularly in resource exporting regions such as Africa, the Middle East, the Commonwealth of Independent States (CIS) and South America).

Finally, the rough two-to-one relationship that prevailed for many years between world trade growth and world GDP growth appears to have broken down, as illustrated by the fact that trade and output have grown at around the same rate for the last three years. This changing relationship has made trade forecasting particularly difficult in recent years and will continue to cloud the outlook for 2015 and 2016.