Rapid government responses to the impact of Covid-19 on world trade have helped to temper the worst-case scenario projected in April, according to the World Trade Organization (WTO) economists.
There’s no doubt however that trade volumes will register a steep decline this year.
The volume of merchandise trade shrank by 3% year‑on‑year in the first quarter according to the organisation’s statistics. Initial estimates for the second quarter, when the virus and associated lockdown measures affected a large share of the global population, indicate a year‑on‑year drop of around 18.5%.
“These declines are historically large, but could have been much worse,” said WTO Director‑General Roberto Azevêdo. “The WTO's 20 April annual trade forecast, in light of the large degree of uncertainty around the pandemic’s severity and economic impact, set out two plausible paths - a relatively optimistic scenario in which the volume of world merchandise trade in 2020 would contract by 13%, and a pessimistic scenario in which trade would fall by 32%. As things currently stand, trade would only need to grow by 2.5% per quarter for the remainder of the year to meet the optimistic projection.”
Looking ahead to 2021, adverse developments, including a second wave of Covid‑19 outbreaks, weaker than expected economic growth, or widespread recourse to trade restrictions, could see trade expansion fall short of earlier projections,” said Azevêdo.
"The fall in trade we are now seeing is historically large – in fact, it would be the steepest on record. But there is an important silver lining here - it could have been much worse.”
But we can’t afford to be complacent, he added. “Policy decisions have been critical in softening the ongoing blow to output and trade, and they will continue to play an important role in determining the pace of economic recovery. For output and trade to rebound strongly in 2021, fiscal, monetary, and trade policies will all need to keep pulling in the same direction."