The WTO (World Trade Organization) forecasts a decrease in the volume of world trade of 9.2% by 2020, followed by an increase of 7.2% in 2021. These estimates are subject to an unusually high degree of uncertainty, as they depend on developments of the pandemic and the responses of governments.
According to current data, the expected decline for the current year is less marked than that announced by the more optimistic of the two hypotheses set out in the WTO’s April trade forecasts, which was 12.9%. Strong trade results in June and July instill some optimism about global trade growth in 2020.
What changed the world trade forecast made in April?
The growth in world trade in COVID-19-related products was especially strong in those months, illustrating that trade can help governments obtain needed supplies. In contrast, the forecast for next year is more pessimistic than the previous estimate of growth of 21.3% and places merchandise trade in 2021 well below the trend it showed before the pandemic.
World trade results so far this year have exceeded expectations due to the sudden increase recorded in June and July when containment measures were relaxed and economic activity accelerated. The pace of expansion could slow down sharply once pent-up demand is exhausted and companies’ inventories have been replenished. Results may be more negative if there is a COVID 19 outbreak in the fourth quarter.
Unlike world trade, GDP fell more than expected in the first half of 2020, which caused the forecasts for the year to be lowered. According to consensus estimates, the decline in GDP weighted according to the world market in 2020 is now -4.8%, compared to the -2.5% expected in the most optimistic hypothesis set out in the April WTO forecasts. GDP growth is projected to rebound to 4.9% in 2021, but that largely depends on policy measures and the severity of the disease.