World trade is expected to fall by between 13 per cent and 32 per cent in 2020 as the COVID- 19 pandemic disrupts normal economic activity and life around the world, a report by the World Trade Organisation (WTO) has estimated.
The Director General, WTO, Roberto Azevêdo, stated this in an international trade statistics forecast posted on the organisation’s website.
The report anticipated a recovery in trade next year. This, it, however, pointed would be dependent on the duration of the outbreak and the effectiveness of the policy responses.
“Nearly all regions will suffer double-digit declines in trade volumes in 2020, with exports from North America and Asia hit hardest.
“Trade will likely fall steeper in sectors with complex value chains, particularly electronics and automotive products.
“Services trade may be most directly affected by COVID-19 through transport and travel restrictions,” it stated.
According to the report, merchandise trade volume already fell by 0.1 per cent in 2019, weighed down by trade tensions and slowing economic growth.
It noted that the dollar value of world merchandise exports in 2019 fell by three per cent to $18.89 trillion, while the value of commercial services exports rose two per cent to $6.03 trillion in 2019.
“The wide range of possibilities for the predicted decline is explained by the unprecedented nature of this health crisis and the uncertainty around its precise economic impact.
“But WTO economists believe the decline will likely exceed the trade slump brought on by the global financial crisis of 2008 2009,” it added.
Furthermore, the report stated that estimates of the expected recovery in 2021 are equally uncertain, with outcomes depending largely on the duration of the outbreak and the effectiveness of the policy responses.
“This crisis is first and foremost a health crisis which has forced governments to take unprecedented measures to protect people’s lives,” WTO Director-General Roberto Azevêdo said.
“The unavoidable declines in trade and output will have painful consequences for households and businesses, on top of the human suffering caused by the disease itself.”
“The immediate goal is to bring the pandemic under control and mitigate the economic damage to people, companies and countries. But policymakers must start planning for the aftermath of the pandemic,” he said.
It added: “These numbers are ugly – there is no getting around that. But a rapid, vigorous rebound is possible. Decisions taken now will determine the future shape of the recovery and global growth prospects.
“We need to lay the foundations for a strong, sustained and socially inclusive recovery. Trade will be an important ingredient here, along with fiscal and monetary policy.
“Keeping markets open and predictable, as well as fostering a more generally favourable business environment, will be critical to spur the renewed investment we will need. And if countries work together, we will see a much faster recovery than if each country acts alone.”
The report revealed that global trade was already slowing in 2019 before the virus struck, weighed down by trade tensions and slowing economic growth.
It showed that world merchandise trade registered a slight decline for the year of 0.1 per cent in volume terms after rising by 2.9 per cent the previous year.
Meanwhile, the dollar value of world merchandise exports in 2019 fell by three per cent to $18.89 trillion.
In contrast, world commercial services trade increased in 2019, with exports in dollar terms rising by two per cent to $6.03 trillion.
Nevertheless, the pace of expansion was slower than in 2018, when services trade increased by nine per cent.
The WTO noted that the economic shock of the COVID-19 pandemic inevitably invites comparisons to the global financial crisis of 2008-09, adding that the crises are similar in certain respects, but very different in others.
“As in 2008-09, governments have again intervened with monetary and fiscal policy to counter the downturn and provide temporary income support to businesses and households. “But restrictions on movement and social distancing to slow the spread of the disease mean that labour supply, transport and travel are today directly affected in ways they were not during the financial crisis.
“Whole sectors of national economies have been shut down, including hotels, restaurants, non-essential retail trade, tourism and significant shares of manufacturing.
“Under these circumstances, forecasting requires strong assumptions about the progress of the disease and a greater reliance on estimated rather than reported data,” it added.
Under the optimistic scenario, it predicted that recovery would be strong enough to bring trade close to its pre-pandemic trend.
“A strong rebound is more likely if businesses and consumers view the pandemic as a temporary, one-time shock. In this case, spending on investment goods and consumer durables could resume at close to previous levels once the crisis abates.
“On the other hand, if the outbreak is prolonged and/or recurring uncertainty becomes pervasive, households and business are likely to spend more cautiously,” it added.