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, according to the World Trade Organization. WTO said today that 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.
The response of political leadership can also have a big impact in the outcome. But WTO economists believe the decline will likely exceed the trade slump brought on by the global financial crisis of 2008‑09 (Chart above). 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,” said WTO Director-General Roberto Azevêdo.
“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,” observed Azevêdo.
Kristalina Georgieva, Managing Director of the International Monetary Fund echoed the grim message. “We are still faced with extraordinary uncertainty about the depth and duration of this crisis. It is already clear, however, that global growth will turn sharply negative in 2020. In fact, we anticipate the worst economic fallout since the Great Depression. Just three months ago, we expected positive per capita income growth in over 160 of our member countries in 2020. Today, that number has been turned on its head: we now project that over 170 countries will experience negative per capita income growth this year,” said Georgieva.
What to Do?
“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,” Azevêdo said.
“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 inc
In his widely-shared view 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 favorable business environment, will be critical to create the renewed investment needed. A much faster recovery will occur with global actions rather than if each country acts alone.
Trade, of course was already slackening in 2019 before the virus struck, because of trade tensions (Trump’s tariff wars are notable here – editor) and slowing economic growth. World merchandise trade registered a slight decline for the year of ‑0.1% in volume terms after rising by 2.9% in the previous year. Meanwhile, the dollar value of world merchandise exports in 2019 fell by -3% to $18.89 trillion.
In contrast, world commercial services trade increased in 2019, with exports in dollar terms rising by 2% to $6.03 trillion. The pace of expansion was slower than in 2018, when services trade increased by 9% though. Facts on merchandise and commercial services trade developments are presented in Appendix Tables 1 through 4 and can be downloaded from the WTO Data Portal at data.wto.org.