Global trade will plunge by a third in 2020: WTO

Updated April 09, 2020

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Washington: The International Monetary Fund building is viewed on Wednesday. The IMF and the World Bank, will adopt a  “virtual format” for their spring meetings instead of convening in person in Washington, DC.—AFP
Washington: The International Monetary Fund building is viewed on Wednesday. The IMF and the World Bank, will adopt a “virtual format” for their spring meetings instead of convening in person in Washington, DC.—AFP

GENEVA: Global trade could plummet by a third this year due to the coronavirus pandemic, the World Trade Organisation said on Wednesday, warning the deepest recession “of our lifetimes” could be on the horizon.

“Covid-19 has completely upended the global economy and with it international trade,” WTO chief Roberto Azevedo told reporters in a virtual briefing from Geneva.

The global trade body was projecting that “trade in 2020 will fall steeply in every region of the world, and basically across all sectors of the economy,” he said.

The WTO acknowledged that there was huge uncertainty around how the economic crisis around the pandemic, which has infected more than 1.4 million people globally and killed nearly 83,000, would unfold.

Stressing that the situation was first and foremost a health crisis, Azevedo warned that “the unavoidable declines in trade and output will have painful consequences for households and businesses, on top of the human suffering caused by the disease itself.”

WTO presented two scenarios that it deemed “plausible”, depending on how quickly the pandemic was conquered and the measures governments put in place to dampen the blow.

“In an optimistic scenario, our economists see the volume of global merchandise trade falling by 13pc this year compared to 2019,” Azevedo said.

That outlook points to a sharp drop in trade followed by a recovery starting in the second half of 2020.

“If the pandemic is brought under control relatively soon, and the right policies are in place, trade and output could rebound nearly to their pre-pandemic trajectory as early as 2021, regardless of how steep the initial fall is,” Azevedo said.

But he warned that “if the pandemic is not brought under control and governments fail to implement and coordinate effective policy responses, the decline could be 32 per cent, or even more.”

North America and Asia would be hardest-hit and could see their exports plunge by 40 and 36pc respectively, while Europe and South America could see declines of more than 30 percent, the WTO said.

“These numbers are ugly,” Azevedo acknowledged. “There is no way around that.” The downturn “may well be the deepest economic recession or downturn of our lifetimes”, he said, calling on governments to “make the most of all potential drivers of sustainable growth to reverse this situation.” In its main annual forecast, the 164-member WTO pointed out that trade had already been slowing in 2019, before the emergence of the novel coronavirus.

Trade tensions, uncertainty and slowing economic growth weighed on global merchandise trade, which registered a slight decline of 0.1 percent in 2019 after rising 2.9 percent a year earlier.

The dollar value of world merchandise exports fell by three percent to $18.89 trillion, the WTO said.

World commercial services trade fared better last year, with exports in dollar terms rising by two percent to $6.03 trillion, but the expansion was far slower than in 2018, when services trade increased by nine percent, said the WTO.

However, the situation has taken a dramatic turn since Covid-19 first emerged in China late last year.

Published in Dawn, April 9th, 2020