Economy

World trade registers historic 18.5% fall in Q2 of 2020, but slight recovery possible in Q3: WTO

Our Bureau New Delhi | Updated on August 19, 2020

The WTO has designed the Goods Trade Barometer to gauge the momentum and identify turning points in world trade growth   -  AFP

WTO’s Goods Trade Barometer’s latest reading indicates L-shaped recovery in 2021, leaving global trade well below its pre-pandemic trajectory

Hit by Covid-19 disruptions, world trade in goods is likely to have registered a historic 18.5 per cent fall in the second quarter of 2020 (year-on-year), at par with the lows of the 2008-09 financial crisis, but there are indications of a slight recovery in the third quarter, according to the latest reading of the World Trade Organization’s Goods Trade Barometer.

“Additional indicators point to partial upticks in world trade and output in the third quarter, but the strength of any such recovery remains highly uncertain: an L-shaped, rather than V-shaped, trajectory cannot be ruled out,” according to a WTO statement based on the current barometer reading released on Wednesday.

Signs of export recovery

Providing some hope to exporters across the world, including India, export orders, with a barometer reading of of 88.4, have started showing signs of recovery, the statement pointed out. Indices for electronic components (92.8) and agricultural raw materials (92.5), too, have held up relatively well, showing only small declines.

The slightly bright prospects for export orders seem to be in line with the decline in India’s exports slowing down in June and July (year-on-year) this year. After plummeting 34 per cent and 60 percent in March and April 2020, respectively, the decline in India’s exports in July was at about 10 per cent.

However, the WTO warns that the heavy economic toll of the Covid-19 pandemic suggests that the projections for a strong, V-shaped trade rebound in 2021 may prove overly optimistic. “As uncertainty remains elevated, in terms of economic and trade policy as well as how the medical crisis will evolve, an L-shaped recovery is a real prospect. This would leave global trade well below its pre-pandemic trajectory,” it said.

Gauging trade

The WTO has designed the Goods Trade Barometer to gauge the momentum and identify turning points in world trade growth. A reading of 100 indicates growth in line with medium-term trends; readings greater than 100 suggest above-trend growth, while those below 100 indicate below-trend growth.

The latest reading of the barometer at 84.5 is the lowest on record, in data going back to 2007, and on par with the nadir of the 2008-09 financial crisis, the statement said.

The reading, which is 15.5 points below the baseline value of 100 for the index and 18.6 points down from the same period last year, is broadly consistent with WTO statistics issued in June, which estimated an 18.5 per cent decline in merchandise trade in the second quarter of 2020 compared with the same period last year, it added.

The exact extent of the fall in trade will only be confirmed later this year when official trade volume data for the period from April to June become available.

All of the barometer’s component indices remain well below trend, with many registering historic lows, although some have begun to stabilise. Indices for automotive products (71.8) and air freight (76.5) have been by far the worst on record since 2007. Container shipping (86.9) also remains deeply depressed.

Published on August 19, 2020

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