In a new trade outlook by the World Trade Organization, WTO Director Roberto Azevêdo called the global economic situation “ugly.”
“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,” said Azevêdo. “The immediate goal is to bring the pandemic under control and mitigate the economic damage to people, companies and countries. But policymakers must start planning for the aftermath of the pandemic.”
Trade was already slowing before the pandemic struck with world merchandise trade down 0.1 percent in 2019 and the dollar value of merchandise exports slipping 3.0 percent to $18.89 trillion. The commercial service sector saw export values rise 2 percent in 2019 to $6.03 trillion, but could be hardest hit from the crisis due to transport and travel restrictions.
The WTO forecasts world merchandise trade will plummet by 13 to 32 percent in 2020 due to the COVID-19 pandemic.
“These numbers are ugly – there is no getting around that. But a rapid, vigorous rebound is possible,” added Azevêdo.
Governments have stepped up during the crisis to implement monetary and fiscal policies to counteract the economic downturn, as they did during the 2008-09 financial crisis. However, the restrictions on movement on social distancing have impacted labor supply, transport and travel and caused whole sectors of national economies to be shut down, said the WTO in its report.
The WTO sees two possible recovery scenarios: “(1) a relatively optimistic scenario, with a sharp drop in trade followed by a recovery starting in the second half of 2020, and (2) a more pessimistic scenario with a steeper initial decline and a more prolonged and incomplete recovery.”
A strong rebound is more likely if businesses and consumers view the pandemic as a temporary, one-time shock, said the WTO. If the outbreak is prolonged, economic uncertainty is likely to negatively impact consumer and business spending. The WTO expects nearly all regions in the world to see double-digit losses in trade volume this year.
“If the pandemic is brought under control and trade starts to expand again, most regions could record double-digit rebounds in 2021 of around 21 percent in the optimistic scenario and 24 percent in the pessimistic scenario – albeit from a much lower base. The extent of uncertainty is very high, and it is well within the realm of possibilities that for both 2020 and 2021 the outcomes could be above or below these outcomes.”
“As we confront what may well be the deepest economic downturn of our lifetimes, we should aim to make the most of all potential drivers of sustainable growth to reverse the situation,” said Azevêdo.
”Decisions taken now will determine the future shape of the recovery and global growth prospects. We need to lay the foundations for a strong, sustained and socially inclusive recovery. Trade will be an important ingredient here, along with fiscal and monetary policy. Keeping markets open and predictable, as well as fostering a more generally favorable business environment, will be critical to spur the renewed investment we will need. And if countries work together, we will see a much faster recovery than if each country acts alone.”
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