World trade will grow by a mere 2.5 percent this year, dragged down by Europe to less than half of the previous 20-year average, the World Trade Organization (WTO) said on Friday.
The WTO slashed its April estimate from 3.7 percent and also lowered its forecast for 2013 to 4.5 percent growth from 5.6 percent.
"I see the risk more on the downside than the upside," WTO Director General Pascal Lamy said at a news conference in Singapore. "What could be surprising is that you have a volume of trade that is lower than world (economic) growth."
The WTO figures are based on world economic growth of 2.1 percent in 2012 and 2.4 percent 2013, matching the consensus estimate of economic forecasts.
"The main reason for the growth slowdown is of course Europe," said Lamy, who will step down next year as head of the 157-member group that has so far failed to agree on major reforms of global trade rules.
"We also know U.S. growth is lower than expected, (and) Japan is not in great shape."
The WTO now expects 1.5 percent growth in exports from developed economies this year, instead of the previous forecast of two percent.
Shipments from developing countries are likely to grow by 3.5 percent, down from a previous forecast of 5.6 percent.
The global trade body also sees developed nations more than doubling export growth to 3.3 percent next year and developing countries exporting 5.7 percent more.
The WTO said in a statement that its 2013 estimates assume current policy measures will be enough to avoid a breakup of the euro and that U.S. will stabilize public financesin order to avoid automatic spending cuts and tax increases early next year.