Global trade volume estimated to contract 18.5% in Q2 of 2020: WTO

International trade volume shrank 3% in Q1, annual forecast close to 13% fall

After shrinking 3 per cent in the first quarter of 2020, global trade volumes are set to contract by up to 18.5 per cent in the second quarter due to the Covid-19 pandemic, the World Trade Organization (WTO) said on Monday.

Initial estimates for the second quarter, when the virus and associated lockdown measures affected a large share of the global population, indicate continuing challenges across sectors. However, the WTO said global trade volumes in 2020 seem closer to contracting by 13 per cent and not the worst case scenario of 32 per cent indicated initially.

“Looking ahead to 2021, adverse developments, including a second wave of Covid 19 outbreak, weaker than expected economic growth, or widespread recourse to trade restrictions, could see trade expansion fall short of earlier projections,” the WTO said.

In April, the WTO's annual trade forecast had stressed that volume of world merchandise trade in 2020 might contract by 13 per cent in a relatively optimistic scenario, while the fall might be up to 32 per cent in a pessimistic scenario. Now, trade economists at the global body say trade would only need to grow by 2.5 per cent per quarter for the remainder of the year to meet the optimistic projection.

Global commercial flights, which carry a substantial amount of international air cargo, were down nearly three quarters ( 74 per cent) between January 5 and April18, and have since risen 58 per cent through mid-June. Container port throughput have staged a partial recovery in June compared to May. Meanwhile, indices of new export orders from purchasing managers' indices also started to recover in May after record drops in April.

“The outlook for the global economy over the next two years remains highly uncertain. For output and trade to rebound strongly in 2021, fiscal, monetary, and trade policies will need to keep pulling in the same direction,” said WTO Director General Roberto Azevedo.

The World Bank’s recent forecast would see global output decline by 5.2 per cent in 2020. Merchandise trade volume already fell by 0.1 per cent in 2019, weighed down by trade tensions and slowing economic growth. Global merchandise exports in 2019 fell by 3 per cent to $18.89 trillion, while the value of commercial services exports rose 2 per cent to $6.03 trillion in 2019.

International trade was already in a difficult position when the pandemic struck, and the after-effects of trade tensions between the US and China were already expected to continue for a large part of 2020. The WTO has warned that developing economies would require assistance given that the current crisis has hit almost all sectors. But trade will likely be affected more in sectors with complex value chains, particularly electronics and automotive products, it said. 

However, globally services trade may be most directly affected by Covid-19 through overarching transport and travel restrictions. 

India’s exports contracted 36.47 per cent in May after a historic fall of 60 per cent in April, even as the lockdown eased and ports cleared cargo. While the government says this offers hopes of recovery, exporters remain doubtful. Outbound trade has fallen for the third straight month.