World trade fell sharply in the first half of the year, as the COVID-19 pandemic upended the global economy. However, rapid government responses helped temper the contraction, and WTO economists now believe that while trade volumes will register a steep decline in 2020, they are unlikely to reach the worst-case scenario projected in April.
- The volume of merchandise trade shrank by 3% year‑on‑year in the first quarter according to WTO statistics.
- Initial estimates for the second quarter indicate a year‑on‑year drop of around 18.5%
- Declines are historically large, but could have been much worse.
- Looking ahead to 2021, adverse developments, including a second wave of COVID‑19 outbreaks, weaker than expected economic growth, or widespread recourse to trade restrictions, could see trade expansion fall short of earlier projections.
The COVID‑19 pandemic and associated containment efforts intensified in the second half of March. Strict social distancing measures and restrictions on travel and transport were fully in effect in most countries throughout April and May, and are now increasingly being relaxed. These developments are reflected in a variety of economic indicators which, taken together, suggest trade may have possibly bottomed out in the second quarter of 2020:
- Global commercial flights, which carry a substantial amount of international air cargo, were down nearly three quarters (‑74%) between 5 January and 18 April, and have since risen 58% through mid-June.
- Container port throughput also appears to have staged a partial recovery in June compared to May.
- Indices of new export orders from purchasing managers’ indices started to recover in May after record drops in April.
The outlook for the global economy over the next two years remains highly uncertain. This is reflected in the range of GDP estimates from other international organizations, in some cases relying on multiple scenarios. The World Bank, OECD and IMF have all released forecasts showing significant slowdowns in global trade and GDP; all are broadly consistent with the WTO’s forecast for the current year. The World Bank’s recent forecast would see global output decline by 5.2% in 2020, falling between the WTO’s optimistic and pessimistic range. Other international organizations’ GDP forecasts for 2020 are also increasingly negative, even as their trade projections stay roughly in line with the WTO’s optimistic scenario. These estimates imply a less negative trade response to declining GDP growth than was observed during the global financial crisis of 2008‑09.