The World Trade Organisation now forecasts a 9.2 per decline in international merchandise trade for 2020, followed by a 7.2 per cent rise next year. 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 forecast is less severe than the 12.9 per cent drop outlined in the WTO's April trade forecast. Strong trade performance in June and July have brought some signs of optimism for overall trade growth in 2020, WTO said .
Trade growth in Covid-19 related products was strong in June and July, showing the global economy's ability to help governments obtain supplies. Conversely, the forecast for next year is more pessimistic than the previous estimate of 21.3 per cent growth, leaving merchandise trade well below its pre-pandemic trend in 2021. The performance of the 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, the Organisation said.
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 the world market-weighted GDP in 2020 at -4.8 per cent compared to -2.5 per cent under the 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.
Global merchandise trade recorded its sharpest ever one-period decline in the second quarter, falling 14.3 per cent compared to the previous period, but the impact differed strongly across regions. The steepest declines were in Europe and North America, where exports fell 24.5 per cent and 21.8 per cent, respectively. By comparison, Asian exports were relatively unaffected, dropping just 6.1 per cent. During the same period imports were down 14.5 per cent in North America and 19.3 per cent in Europe but just 7.1 per cent in Asia.