Lebanese Ministry of Information
The World Trade Organization (WTO) on Tuesday said it expects global trade to drop around 18.5% in the second quarter of 2020, adding that restrictions being gradually lifted to contain the Covid-19 suggest that trade may have possibly bottomed out in the second quarter of 2020. The volume of merchandise trade shrank 3% year-on-year in the first quarter.
The global trade watchdog said that world trade fell sharply in the first half of the year, as the Covid-19 pandemic upended the global economy. However, rapid government responses helped temper the contraction, and WTO economists now believe that while trade volumes will register a steep decline in 2020, they are unlikely to reach the worst-case scenario projected in April.
“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,” said WTO’s outgoing Director-General Roberto Azevêdo.
The Geneva-based organisation had in April said that the decline in world trade will likely exceed the trade slump brought by the global financial crisis of 2008-09 with merchandise trade expected to decline 13-32% in 2020 due to the Covid-19 pandemic. ..
“These developments are reflected in a variety of economic indicators which, taken together, suggest trade may have possibly bottomed out in the second quarter of 2020,” it said.
In a pessimistic case, the volume of global goods trade could drop by as much as 32% this year with the possibility of a 24% increase next year.
“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,” WTO said on Tuesday.
However, 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. Trade growth for 2021 could come in at closer to 5%, which would leave it well below the pre-pandemic trajectory.
“On the other hand, a quick return to its pre-pandemic trajectory would imply trade growth in 2021 of around 20%, in line with the April forecast’s optimistic scenario,” it said, adding that monetary, fiscal and trade policy choices will play a significant role in determining the pace of recovery.
Looking ahead to next year, a slower-than-expected pace of economic recovery would weigh on trade growth.
