World trade in goods could rise by 7.5 per cent this year as the economic recovery strengthens, the World Trade Organisation (WTO) said yesterday.This compares with a stronger-than-predicted 4.5 per cent growth last year, reflecting surging trade in the second half after first-half setbacks due to SARS and the war in Iraq.

The revival in global economic activity, estimated at 3.7 per cent in 2004, is expected to be more broadly based than last year when the US and China - which overtook Japan to become the world's third-largest importer - were the driving forces.

But the WTO's economists warned that the projections assume a further widening of the US current account deficit of $542 billion (€452 billion) last year - a gap seen as unsustainable in the medium term. With all other regions in surplus, the US ran a merchandise trade deficit with the rest of the world of $549 billion in 2003, equivalent to 7.6 per cent of all world trade in goods.

Other risk factors this year include continued high oil prices and the stronger euro, which could weaken economic recovery in western Europe.

The 17 per cent rise in the dollar value of the region's exports last year was almost entirely due to exchange rate changes, the WTO noted, explaining why Germany nudged the US off the top exporter's slot for the first time since 1990.

The value of world goods trade rose 16 per cent last year to $7,274 billion - the biggest nominal yearly increase since 1995 - but two-thirds of this was attributable to dollar weakness, according to the WTO.

For developing countries, the nominal increase was slightly higher than the global average at 17 per cent. This largely reflects explosive trade growth by China.