World merchandise trade fell by 3% in the first quarter of the year, with declines for the second quarter projected to be less severe than initially forecast, according to new figures from the World Trade Organization (WTO).
WTO statistics show initial estimates for the volume of merchandise trade 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 the WTO says it could have been much worse. Its 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, the WTO says trade would only need to grow by 2.5% per quarter for the remainder of the year to meet the optimistic projection. 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.
“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,” says Director-General Roberto Azevêdo. “This is genuinely positive news but we cannot afford to be complacent. 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.”
Looking ahead to next year, a slower-than-expected pace of economic recovery would weigh on trade growth, which would see it come in at closer to 5% in 2021, leaving 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. Monetary, fiscal and trade policy choices will play a significant role in determining the pace of recovery, the WTO says.
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By GlobalDataThe outlook for the global economy over the next two years, however, remains highly uncertain. The World Bank, OECD and IMF have all released forecasts showing significant slowdowns in global trade and GDP; all are broadly consistent with the WTO’s forecast for the current year.
The World Bank’s recent forecast would see global output decline by 5.2% in 2020, falling between the WTO’s optimistic and pessimistic range. Other international organisations’ GDP forecasts for 2020 are also increasingly negative, even as their trade projections stay roughly in line with the WTO’s optimistic scenario. These estimates imply a less negative trade response to declining GDP growth than was observed during the global financial crisis of 2008-09.
