Return of global economy, trade to pre-pandemic growth
While the spread of the contagion leaves economies and businesses still counting the costs, economists evaluate what economic and trade recovery will look like worldwide with new vaccines being rolled-out rapidly.
“Economic developments will critically depend on the shape of the pandemic curve and the severity of containment efforts taken globally and by individual states as well as the effectiveness of vaccination programs globally,” said Tomasz Brodzicki, senior economist at IHS Markit.
Recurring coronavirus outbreaks are creating a stop-and-start for different economies worldwide, with airlines removing scheduled flights, factories operating on minimal staffing, restaurants and movie theatres either shuttering once more or functioning under stringent restrictions.
“Although the COVID-19 vaccines have been developed with unprecedented speed, the effects of vaccination programs are unlikely to be felt globally before third or fourth quarter of 2021, as larger parts of the population get immunity,” Brodzicki added.
“However, many uncertainties still remain and are likely to observe more pronounced adjustments to global value chain or trade patterns (trade diversion effects) the longer the pandemic lasts.”
Global trade to rebound in 2021
Real value of global trade is set to surge by 7.6 per cent year-on-year in 2021 and 5.2 per cent in 2022 according to IHS Markit. This follows an estimated contraction of 13.5 per cent in 2020 to $16.4 trillion.
“Global trade set for significant rebound in 2021 following historic contraction COVID-19,” Brodzicki further added, while adding that uncertainties remain.
“The growth this year is attributed to the forecasted recovery in global GDP in 2021 and a particularly strong growth impulse expected in the second quarter,” noted IHS Markit, which surveys economic activity worldwide.
How quick of a rebound?
The predicted compound annual growth rate for the real value of global trade for the period of 2021-2030 is 3.5 per cent. In terms of volumes, IHS Markit estimates a contraction of 11.2 per cent in 2020 to 12.7 billion metric tons and forecasts a 7.5 per cent growth in 2021 and a 4.1 per cent increase in 2022.
“This will allow the global economy and in particular the transport community to regain momentum and to recoup some of the losses from the trade collapse of 2020,” noted IHS Markit. The forecasted compound annual growth rate for global trade volume stands at 3.2 per cent in the period of 2021-30.
“The estimated contraction in global trade volume in 2020 (-11.2 per cent) is higher than the contraction in the global financial crisis (-7.7 per cent),” Brodzicki said.
Global trade on recovery path
Led by trade in goods, global trade recovered in the last quarter of 2020, reducing its overall decline for the year to about 9 per cent, said United Nations Conference on Trade and Development (UNCTAD in a new report, noting that the rebound, while uneven, was largely powered by developing countries.
But while imports and exports of goods grew by about 8 per cent in the fourth quarter of last year, trade in services stagnated as measures taken in the global fight against COVID-19 continued to affect sectors such as travel, indicated the latest global trade update.
“Important factors that could affect global trade in 2021 include the side-effects of Brexit, the new US administration’s trade agenda taking a more multilateral trade policy approach or elections in in countries like Germany resulting of a shifting in power impacting German and EU policies,” Brodzicki added.