World trade expected to plunge 32% in 2020 amid coronavirus crisis
Outcomes depend largely on the duration of the outbreak and the effectiveness of the policy responses, says World Trade Organisation
World trade is expected to plunge by up to 32% in 2020 as the coronavirus continues to wreak havoc across the globe, disrupting normal economic activity and life.
Declining world trade will leave many countries poorer amid fears of a global economic recession.
In its annual trade statistics and outlook report published on Wednesday, the World Trade Organisation (WTO) says the pandemic represents an unprecedented disruption to the global economy and world trade, as production and consumption are scaled back across the globe.
WTO economists believe the decline will likely exceed the trade slump brought on by the global financial crisis of 2008/2009.
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, the WTO said.
“These numbers are ugly — there is no getting around that,” WTO director-general Roberto Azevêdo said.
“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,” he said.
Keeping markets open and predictable, as well as fostering a more generally favourable business environment, will be critical to spur the renewed investment the world will need.
“And if countries work together, we will see a much faster recovery than if each country acts alone,” the WTO chief said.
Azevêdo highlighted that the crisis that is first and foremost a health crisis which has forced governments to take unprecedented measures to protect people’s lives.
“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.
According to the WTO report, trade was already slowing in 2019 before the virus struck, weighed down by trade tensions and slowing economic growth. World merchandise trade registered a slight decline for the year of ‑0.1% in volume after rising by 2.9% in 2018.
The WTO says the economic shock of the pandemic inevitably invites comparisons to the global financial crisis of 2008/2009. It said these crises are similar in certain respects but very different in others. As in 2008, 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, the global trade body said.
In its forecast, the WTO has 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. But under both scenarios, most regions will suffer double-digit declines in exports and imports in 2020.