Despite Concerns, Global Trade is Recovering

The coronavirus pandemic has largely impacted international trade. At the start of the outbreak, global trade had already suffered the highest year-over-year (YOY) drop since the Great Depression. This has led businesses to reconsider their supply chains, with the IMF predicting that the global economy will suffer its worst year yet. Some experts think the economy will dip by 3%, which is worse than the 0.1% shrink during the Great Recession. However, it is also likely that it will recover by 2021 with a 5.8% growth, giving hope to many.

Trade is Returning in Many Countries

“Trade is one sector of the economy that has proven to be more resilient,” says Shaun Roache, chief economist for the Asia-Pacific region at S&P Global.

Many are remaining hopeful that the economy will bounce back after seeing the recent returns in global trade. It’s recovering a lot faster than it previously did during the 2008 financial crisis, despite predictions of a long-term decline. Even though trade isn’t fully prospering as it did before the outbreak, it has managed to repair about half of the damage done. Orders in exports have been increasing as well, with new ones being placed in 14 out of 38 economies in August, which is a leap from only four back in June.

In China, trade volume has already surpassed levels from the previous year and has even achieved a 9.5% increase in outbound shipping. Experts believe that China may be the only country to see economic growth this year. On the other hand, the economies of Italy and Spain are likely to contract by 9.3% and 10.7%, respectively. This number is much lower for South Korea and Germany, at 1.5% and 5.3%. The difference in number mainly attributes to trade, which can largely contribute to the recovery of the world’s economy.

South Korea has seen some growth as well, with exports being just below 0.2% from 2019. Manufacturing companies in Korea are already planning on expanding production capacity while hiring more workers to meet the growing demand. In fact, Ecopro BM Co.’s sales have increased while Synus Tech Co. has hardly been affected by the pandemic. 

What Can We Expect?

Since the recent trade collapse accounts for mainly trade restrictions instead of a long-term fall, recovery has been much quicker. This has allowed imports and exports to recover quickly as well, and governments have also been working to ensure trade finance and backstop banks. 

However, while many countries are seeing recovery and growth, it is still too early to be sure. Major importers could implement more-protectionist measures, and there is always the second wave of the coronavirus to look out for. Governments and businesses alike must maintain safety measures and help curb the disease to avoid a double-dip recession.

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