Sunday 3 July 2022

Global trade to rebound to 10.8% in 2021: WTO

GENEVA, Switzerland, October 5, 2021

World merchandise trade volume is expected to grow 10.8% in 2021, revised up from 8.0% forecasted in March, while trade growth should slow to 4.7% in 2022, up from 4.0% previously, said the World Trade Organisation (WTO) in a new report.

Growth should moderate as merchandise trade approaches its pre-pandemic long-run trend. Supply-side issues such as semiconductor scarcity and port backlogs may strain supply chains and weigh on trade in particular areas, but they are unlikely to have large impacts on global aggregates. The biggest downside risks come from the pandemic itself.

Behind the strong overall trade increase, however, there is significant divergence across countries, with some developing regions falling well short of the global average.

Main points of the forecast:

•    Quarterly trade growth was up 22.0% year-on-year in Q2 of this year but is expected to slow to 6.6% by Q4, reflecting 2020's drop and recovery.
•    Global GDP will grow 5.3% in 2021, up from 5.1% forecasted in March. Growth should slow to 4.1% in 2022, up from 3.8% previously.
•    The current forecast is close to the upside scenario shown in the last trade forecast, but downside risks now predominate, including strained global supply chains and COVID-19 outbreaks.
•    Regional disparities will remain large. Imports of Asia in 2021 are expected to rise 9.4% compared to 2019, while imports of Least-Developed Countries (LDCs) will fall 1.6%.
•    Services trade is likely to lag behind goods trade, particularly in sectors related to travel and leisure.

"Trade has been a critical tool in combating the pandemic, and this strong growth underscores how important trade will be in underpinning the global economic recovery," Director-General Ngozi Okonjo-Iweala said.

"But inequitable access to vaccines is exacerbating economic divergence across regions. The longer vaccine inequity is allowed to persist, the greater the chance that even more dangerous variants of COVID-19 will emerge, setting back the health and economic progress we have made to date.

"As we approach the 12th Ministerial Conference, members must come together and agree on a strong WTO response to the pandemic, which would provide a foundation for more rapid vaccine production and equitable distribution. This is necessary to sustain the global economic recovery. Vaccine policy is economic policy - and trade policy," she added.

The large annual growth rate for merchandise trade volume in 2021 is mostly a reflection of the previous year's slump, which bottomed out in the second quarter of 2020. Due to a lower base, year-on-year growth in the second quarter of 2021 was 22.0%, but the figure is projected to fall to 10.9% in the third quarter and 6.6% in the fourth quarter, in part because of the rapid recovery in trade in the last two quarters of 2020. Reaching the forecast for 2021 only requires quarter-on-quarter growth to average 0.8% per quarter in the second half of this year, equivalent to an annualized rate of 3.1%.

Trade volume growth is set to be accompanied by market-weighted GDP growth of 5.3% in 2021 and 4.1% in 2022 (revised up from 5.1% and 3.8% previously). GDP growth has been spurred on by strong monetary and fiscal policy support, and by the resumption of economic activity in countries that have been able to deploy COVID-19 vaccines at scale.

The current trade projections imply that the ratio of trade growth to GDP growth will rise to 2.0:1 in 2021 before falling back to 1.1:1 in 2022. If the forecast is realized, this would indicate that the pandemic will not have had a fundamental structural impact on the relationship between world trade and income.

If the current forecast is realized, by the final quarter of 2022 Asia's merchandise imports will be 14.2% higher than they were in 2019. Over the same period, imports will have risen by 11.9% in North America, 10.8% in South and Central America, 9.4% in Europe, 8.2% in Africa, 5.7% in the Commonwealth of Independent States and 5.4% in the Middle East. Asia's exports will have grown 18.8% over that period, while all other regions will have recorded more modest increases: North America (8.0%), Europe (7.8%), CIS (6.2%), South America (4.8%), the Middle East (2.9%) and Africa (1.9%).

It appears that regions with oil-reliant export bases suffered large declines in both merchandise exports and imports during the 2020 recession, and that these losses have since been only partly recovered. South America's relatively strong import recovery also reflects base effects from recessions in some of the region's key economies in 2019.

The forecast projects export volume growth in 2021 will be 8.7% in North America, 7.2% in South America, 9.7% in Europe, 0.6% in the CIS, 7.0% in Africa, 5.0% in the Middle East and 14.4% for Asia. Imports in the same year are set to grow by 12.6% in North America, 19.9% in South America, 9.1% in Europe, 13.1% in CIS, 11.3% in Africa, 9.3% in the Middle East and 10.7% in Asia. Exports and imports of LDCs will increase by an estimated 5.3% and 5.5%, respectively, in 2021. – TradeArabia News Service


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