By Edward Mukaro
GLOBAL trade shows signs of a rebound from the COVID- 19 pandemic, although recovery remains uncertain, as the United Nations World Trade Organisation forecasts a 9.2 percent decline in the volume of world merchandise trade for 2020, followed by a 7.2% rise in 2021.
The COVID- 19 pandemic has had a major impact on how business conducts trade, which has seen an abrupt rise in business’ dependence on e-commerce platforms as the main tools of conducting business, as physical engagement has been severely restricted.
However, a second wave of the pandemic in most nations across the globe may mean that the estimates may still be affected as goes by.
The WTO said, “These estimates are subject to an unusually high degree of uncertainty since they depend on the evolution of the pandemic and government responses to it.
“Current data suggests a projected decline for the current year that is less severe than the 12.9% drop foreseen under the more optimistic of two scenarios outlined in the WTO’s April trade forecast,” the WTO said.
The months of June and July performed beyond expectations, as trade-in COVID- 19 related kits surged, however, growth is most likely expected to be realised in the coming year.
“Strong performance in June and July have brought some signs of optimism for overall trade growth in 2020. Trade growth in COVID- 19 related products was particularly strong in these months, showing trade’s ability to help governments obtain needed supplies.
“Conversely, the forecast for the next year is more pessimistic than the previous estimate of 21.3% growth, leaving merchandise trade well below its pre-pandemic trend in 2021.
“The performance of trade for the year to date exceeded expectations due to a surge in June and July as lockdowns were eased and economic activity accelerated. The pace of expansion could slow sharply once pent up demand is exhausted and business inventories have been replenished. More negative outcomes are possible if there is a resurgence of COVID- 19 in the fourth quarter.”
In contrast to trade, GDP fell more than expected in the first half of 2020, causing forecasts for the year to be downgraded. Consensus estimates now put the decline in world market-weighted GDP in 2020 at -4.8% compared to -2.5% under the more optimistic scenario outlined in the WTOO’s April forecast. GDP growth is expected to pick up to 4.9% in 2021, but this is highly dependent on policy measures and on the severity of the disease.
The WTO added that the divergent performance of trade during the COVID- 19 outbreak has much to do with the nature of the pandemic and the policies used to combat it. Lockdowns and travel restrictions imposed significant supply-side constraints on national economies, drastically reducing output and employment in sectors that are usually resistant to business cycle fluctuations, particularly non-trade services. At the same time, robust monetary and fiscal policies have propped up incomes, allowing consumption and imports to rebound once lockdowns were eased.
By Edward Mukaro