Trade shows signs of rebound from coronavirus, recovery still uncertain: WTO

World trade shows signs of bouncing back from a deep, coronavirus-induced slump, but World Trade Organization economists cautioned Oct. 6 that any recovery could be disrupted by ongoing pandemic effects.

The WTO now forecasts a 9.2% decline in the volume of world merchandise trade for 2020, followed by a 7.2% rise in 2021, it said in a statement.

"However, 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," the organization said.

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, it said. Strong trade performance in June and July has 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," the WTO said. "Conversely, the forecast for next year is more pessimistic."

Trade volume growth should rebound to 7.2% in 2021 but will remain well below the precrisis trend, it said.

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," the WTO said. "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 WTO'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 said.

Although the trade decline during the pandemic is similar in magnitude to the global financial crisis of 2008-09, the organization noted that the economic context is very different. The contraction in GDP has been much stronger in the current recession while the fall in trade has been more moderate. As a result, the volume of world merchandise trade is only expected to decline around twice as much as world GDP at market exchange rates, rather than six times as much during the 2009 collapse, it said.