An outlook of international trade in 2021
Following the devastating effects of the pandemic, international trade may take some time to recover, but many organizations like the WTO and UNCTAD remain optimistic. Here's what they have to say.
What does global trade recovery look like in 2021? Here are some forecasts from the World Trade Organization (WTO), the World Bank, the United Nations Conference on Trade and Development (UNCTAD), and Price Waterhouse Cooper (PWC).
Merchandise Trade Volumes are Expected to Grow
In 2021, international trade will slowly recover from the significant impacts of the COVID-19 pandemic. Forecasts remain positive as the WTO estimated trade volumes to grow by 8% in its trade statistics and trade forecast 2021 after falling 5.3% in 2020.
The World Bank similarly predicts 4% global economic growth over the course of the year, with the Chinese economy expanding by 7.9%. Such projections depend on how the pandemic evolves throughout the year, along with government responses. However, these growth forecasts imply continued resilience in trade, particularly in East-West shipping, a key global trade indicator.
According to the UNCTAD report, most of the major economies recovered by the fall of 2020. However, the large increases are due to the low base for 2020, and trade in many of the major economies was still below 2019 averages. The report also found that the trend of a stronger recovery for goods relative to services was common for all major economies.
Growth Will Be Uneven
In the same report, the UNCTAD forecasts that trade growth will remain stronger throughout the rest of 2021 for East Asia and developed countries, while still lagging for many other countries. PWC also agrees that global growth will not be distributed evenly. Growth will be noticeably higher in some places and absent in others. China, PwC believes, is poised to do particularly well economically, as it is already ahead of where it was pre-COVID.
This contrasts with the experience several developed service-based economies are likely to encounter. The UK, France, and Spain are “unlikely to recover to their pre-crisis levels by the end of the year.” The same will likely be the case for economies where the export of capital goods is a major activity – Germany and Japan are two such examples.
The WTO also forecasts that the relatively positive short-term outlook for global trade is marred by regional disparities, as well as continued weakness in services trade, and lagging vaccination timetables, particularly in poor countries.
Distribution of Vaccines Will Be Key for Recovery
At the end of the day, COVID-19 continues to pose the greatest threat to the outlook for trade, as new waves of infection could easily undermine any hopes for recovery.
Two scenarios have been envisaged by the WTO: the positive scenario is that, if vaccine distribution accelerates, global GDP would add about 1 percentage point in 2021. The volume of world trade in merchandise would also grow by 2.5 percentage points, and trade would return to pre-pandemic levels by the last three months of the year.
On the other hand, the downside scenario is that vaccine production does not keep up with demand. New variants of the virus which are more resistant to vaccines could also emerge, shaving 1 percentage point off of global GDP growth in 2021 and lowering trade growth by nearly 2 percentage points.
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