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Trade set to plunge as COVID-19 pandemic upends global economy

World trade is expected to fall by between 13% and 32% in 2020 as the COVID 19 pandemic disrupts normal economic activity and life around the world.

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.

Chart 1 - World merchandise trade volume, 2000‑2022

Outlook for trade in 2020 and 2021


The economic shock of the COVID-19 pandemic inevitably invites comparisons to the global financial crisis of 2008-09. These 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.


Future trade performance as summarised in Table 1 is thus best understood in terms of two distinct scenarios a relatively optimistic scenario, with a sharp drop in trade followed by a recovery starting in the second half of 2020, and a more pessimistic scenario with a steeper initial decline and a more prolonged and incomplete recovery.


These should be viewed as explorations of different possible trajectories for the crisis rather than specific predictions of future developments. Actual outcomes could easily be outside of this range, either on the upside or the downside.


Under the optimistic scenario, the recovery will be strong enough to bring trade close to its pre-pandemic trend, represented by the dotted yellow line in Chart 1, while the pessimistic scenario only envisages a partial recovery. Given the level of uncertainties, it is worth emphasising that the initial trajectory does not necessarily determine the subsequent recovery. For example, one could see a sharp decline in 2020 trade volumes along the lines of the pessimistic scenario, but an equally dramatic rebound, bringing trade much closer to the line of the optimistic scenario by 2021 or 2022.


After the financial crisis of 2008-09, trade never returned to its previous trend, represented by the dotted grey line in the same chart. 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.


Under both scenarios, all regions will suffer double-digit declines in exports and imports in 2020, except for “Other regions” (which is comprised of Africa, Middle East and Commonwealth of Independent States (CIS) including associate and former member States). This relatively small estimated decline in exports stems from the fact that countries from these regions rely heavily on exports of energy products, demand for which is relatively unaffected by fluctuating prices. If the pandemic is brought under control and trade starts to expand again, most regions could record double-digit rebounds in 2021 of around 21% in the optimistic scenario and 24% in the pessimistic scenario – albeit from a much lower base (Table 1). The extent of uncertainty is very high, and it is well within the realm of possibilities that for both 2020 and 2021 the outcomes could be above or below these outcomes.

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