WTO releases latest Trade Growth Forecast COVID-19 Pandemic will cause Global Trade to Plummet

The World Trade Organization (WTO) released trade growth forecasts for 2020-2021 and trade statistics for 2019

It said that because of the development of the new coronary pneumonia epidemic, global merchandise trade may fall by 13% to 32% in 2020. 

The decline in global trade volume is likely to exceed the trade decline caused by the global financial crisis of 2008-2009.

COVID-19 pandemic will cause global trade to plummet,

WTO says latest trade growth forecat

This crisis is first and foremost a health crisis, forcing governments to take unprecedented measures to protect people's lives.

WTO Director General Roberto Azevêdo analyzed at a video conference, The epidemic itself has already on the basis of a lot of pain for people slowed growth, global output and trade volume will inevitably decline, which will have painful consequences for families and businesses.

Control the epidemic and reduce the economic losses

Azevedo believes that "the immediate goal is to control the epidemic and reduce the economic losses caused by the epidemic to the people, enterprises and the country. Policy makers must start to deal with the aftermath of the epidemic."

Forecasts show that as the new coronary pneumonia pandemic disrupts normal economic activities and lives around the world, world trade is expected to decline by 13% to 32% in 2020.

The unprecedented nature of New Coronary Pneumonia and the uncertainty of its impact on the economy have led to expectations of a downward trade this time. 

Economic Depression to be greater than in 2008-09

WTO economists believe that the decline in trade may exceed the decline in trade brought about by the global financial crisis of 2008-2009.

Uncertainty on recovery of trade after Coronavirus Crisis

There are also uncertainties about the expected recovery of trade in 2021, whose results depend largely on the duration of the outbreak and the effectiveness of the policy response.

Roberto Azevedo, Director General of the WTO, said: "The new coronary pneumonia disease itself causes human suffering, and the inevitable decline in trade and output will have painful consequences for families and businesses."

"The near-term goal is to control the pandemic and mitigate economic losses to individuals, businesses, and the country. But policymakers must begin to plan for the consequences of the pandemic."

Azevedo called on all countries to coordinate and cooperate to lay the foundation for the recovery that will soon occur. 

"The forecast data is not good-looking and this cannot be solved, but there may be a rapid and strong rebound. 

The measures now taken will determine the future shape of the recovery and the global growth prospects. We need to lay a strong, sustained and socially inclusive recovery Fundamentals. Trade will become an important component together with fiscal and monetary policies. 

nCOVID came in 2019, results coming 2020 onwards

Maintaining the openness and predictability of the market and creating a more favorable business environment are essential to increase the new investment we need.

 If countries work together, We will see a faster recovery than each country acting alone. "

Before the outbreak of the New Coronary Pneumonia epidemic, due to the pressure of trade tensions and slowing economic growth, trade has slowed in 2019. 

Compared with the 2.9% increase in 2018, world merchandise trade volume fell slightly by 0.1% in 2019. 

At the same time, global merchandise exports in 2019 fell by 3% in US dollars to 18.89 trillion US dollars.

In contrast, the world’s trade in business services has grown in 2019, and exports in US dollars have increased by 2% to US $ 6.03 trillion. 

The rate of expansion is slower than in 2018, when service trade increased by 9%.

 Similarity between Coronavirus Pandemic and 2008 Recession

The economic impact of the New Coronary Pneumonia pandemic is inevitably compared to the 2008-09 global financial crisis. 

The two crises are similar in some ways, but very different in others.

As in 2008-09, this time the government again adopted monetary and fiscal policies to cope with the economic downturn and provide temporary income support for businesses and households.

However, actions and social restrictions to slow the spread of the virus have caused labor supply, transportation and travel to be directly affected by the financial crisis. 

Also, hotels, restaurants, non-essential retail, tourism and a large number of manufacturing industries were forced to close.

Making predictions in this situation requires making strong assumptions about the progression of the disease and relying more on predicted data than reported data.

Therefore, there may be two completely different situations in the future trade performance: the relatively optimistic situation is that the trade drops sharply and then resumes in the second half of 2020. While the pessimistic situation is that the initial decline is greater and the recovery time is longer and incomplete.

Sharp decline in trade volume in 2020 due to Coronavirus Pessimism

Considering the uncertain factors, it should be emphasized that the initial trajectory does not necessarily determine the trajectory of subsequent development. 

For example, one might see a sharp decline in trade volume in 2020 following a pessimistic forecast, but then it rebounded dramatically, bringing trade closer to an optimistic scenario by 2021 or 2022.

In comparison, the total value of service trade exports last year was 6.03 trillion US dollars, an increase of 2%. 

Compared with the 9% increase achieved in 2018, this expansion is still slow. 

Due to different levels of travel bans issued by countries, trade in services is most directly affected by the epidemic. 

Losses due to Coronavirus cannot be recovered in future

Unlike trade in goods, there is no “inventory” in trade in services, and the losses in trade in services that occur now cannot be recovered in the future. At the same time, the service industry is closely related to transportation, logistics, sports and entertainment activities. 

Although some of these sectors will benefit from the crisis, most service industries will not be able to proceed as usual because people maintain social distance.

"These numbers are ugly and this result cannot be avoided. However, a rapid and powerful rebound is still possible. The resolution now made will determine the prospects for future economic recovery and global growth rates. 

We need to be a strong and sustainable It will lay a solid foundation for a socially inclusive recovery. Together with fiscal and monetary policies, trade will be one of the important elements. 

Keeping the market open and predictable, and fostering a more conducive environment for business development will stimulate the stimulus. Investment is crucial. 

If nations collaborate with each other, we can see a faster recovery than a single battle for each nation. "

After the financial crisis of 2008-09, trade has not yet recovered to its previous prosperity. 

If companies and consumers see this pandemic as a temporary, one-time shock, then a strong rebound is more likely. 

In this case, once the crisis is alleviated, spending on investment goods and durable consumer goods will return to near previous levels.

On the other hand, if the outbreak time is prolonged or uncertainties occur repeatedly, households and businesses may consume more cautiously.

In both optimistic and pessimistic situations, except for "other regions" (including members of Africa, the Middle East, and the CIS), import and export trade in all regions will experience a double-digit decline in 2020. 

If the pandemic is controlled and trade expands again, most regions may achieve a double-digit rebound in 2021, which is about 21% in the optimistic case and 24% in the pessimistic case. 

But it is not ruled out that the results are higher or lower than the above prediction results, after all, the uncertainty is too strong.

Global trade may recover in 2021 after Coronavirus era

Global trade is expected to recover in 2021, but it is not certain. Because the final result will depend on how long the outbreak will last and the effectiveness of the policy responses of various governments. 

Almost all regions will experience double-digit declines in trade this year, with Asia and North America being the hardest hit. 

If the epidemic is brought under control and trade begins to grow again, many regions may experience a double-digit rebound in 2021.

Summary of main points

1. Due to the new pandemic pneumonia pandemic, world merchandise trade will plummet by 13% to 32% in 2020.

2. Trade is expected to resume in 2021, but it depends on the duration of the new coronary pneumonia outbreak and the effectiveness of the policy response.

3. In 2020, almost all regions will experience double-digit declines in trade, with North American and Asian exports hit hardest.

4. In industries with complex value chains, especially electronic products and automotive products, trade may decline sharply.

5. Due to transportation and travel restrictions, trade in services may be most directly affected by new coronary pneumonia.

6. Affected by trade tensions and slowing economic growth, merchandise trade volume has fallen by 0.1% in 2019. 

The dollar value of global merchandise exports fell by 3% in 2019 to $ 18.89 trillion.

7. In 2019, the total value of business services exports increased by 2% to US $ 6.03 trillion.

The WTO compared the impact of the epidemic on global trade with the financial crisis of 2008-09, and found that the two crises were very similar in some ways, but completely different in many ways. 

For example, during the 2008-09 financial crisis, governments of various countries also responded to the economic downturn through monetary and fiscal policies. 

There are also some auxiliary policies for enterprises, which are similar to the fight against the epidemic. 

However, this time the implementation of social distance and restrictive actions to deal with the outbreak, but did not appear during the financial crisis. 

This means that the current supply of labor, transportation and tourism are directly blocked. 

In some countries, "non-essential" economic activities have been drastically reduced, restaurants and hotels closed, and enterprises and factories closed, which is also unprecedented.