Trade in 2020 - the initial results and possible scenarios forward

Key points:

After an already sluggish 2019 a major upturn was expected in global trade in 2020; COVID-19 pandemic, the biggest black swan in a century, destroyed it
World merchandise trade is expected to fall in real value by 13.6% in 2020 due to the COVID-19 pandemic
A major recovery in trade is expected in 2021; its actual size will depend on the severity and the actual duration of the outbreak and the effectiveness of the policy responses worldwide
The pandemic is affecting all regions; however, the severity of the impact is asymmetric with Europe being hit the hardest
The available Q1 2020 results from the IHS Markit Global Trade Atlasas reported by national sources point to a significant and asymmetric shock in the first quarter of the year
PMI new export orders adjusted for most of the states in April 2020 is significantly below the 2009 levels indicating the size of the downturn; as the most prominent leading indicator it points to the possible bottom in Q2 2020
The impact on trade will be larger on sectors (products) with more complex and geographically dispersed forward and backward linkages in the global value chains (GVCs)
The impact will be direct due to restrictions on trade and production imposed as well as indirectly due to the impact on global demand
The impact is not restricted to merchandise trade only; certain services sectors, such as passenger air transport, will be more adversely affected
We now expect the value of global trade to reach USD 16,397.6 billion in 2020 (down by USD 3,037.1 billion in comparison to our last forecast) and the volume of global trade to fall to 12.1 billion metric tons
The V shape recovery is expected; however, the trade levels are unlikely to reach the pre-COVID-19 path with a permanent gap in the trajectory of approx. 1.8 trillion USD and CAGR of 2.8% for 2021-2030; the forecasted average growth rate is very similar to our previous forecast
Our forecast is closer to the «optimistic» scenario of the recent trade forecasts provided by the World Trade Organization

Main report

After an already sluggish 2019, a major upturn was expected in global growth and trade in 2020. As can be seen, the real trade value never recovered to the pre-financial crises’ trajectory. The trend for 2010 – onwards was significantly below the prior trajectory. Our prior forecast predicted it to be above the CAGR 2010-19 and global trade to reach 25.2 trillion USD in 2029. COVID-19 pandemic, the biggest black swan in a century, destroyed it. Global trade collapsed in Q1 of 2020 though asymmetrically. The Q2 2020 results are likely to be much worse. We are very likely to find ourselves on a new trajectory – flatter than the preceding one and with a significant and increasing gap.

Read the whole article in the following link: Trade in 2020 – the initial results and possible scenarios forward