Global trade set to nosedive 20pc in 2020 says Unctad

MANAMA: Global trade is expected to drop by 20 per cent this year as economies struggle to recover from lockdowns imposed due to the Covid-19 outbreak, says a new report by Unctad.

The main UN body dealing with trade, investment and development issues expects the nosedive in merchandise trade to continue in the coming months after it fell by 5pc in the first quarter and points to a 27pc drop for the second quarter.

“There is still a lot of uncertainty about the possibility of any economic recovery in the second half of the year,” said Unctad’s director of international trade Pamela Coke-Hamilton.

“International trade is likely to remain below the levels observed in 2019, but how far depends on the pandemic’s evolution and the type and extent of the policies governments adopt as they try to restart their economies.”

The latest Unctad figures were featured in the first edition of the Global Trade Update, a quarterly report providing a comprehensive snapshot of international commerce and the main issues affecting trade flows.

Although the coronavirus-induced trade slowdown has spared no one, forecasts show a particularly rapid deterioration for developing countries.

While South-South trade saw a drop of just 2pc in the first quarter of the year, Unctad data shows a dramatic 14pc fall in April.

“For developing countries, while declines in exports are likely driven by reduced demand in destination markets, declines in imports may indicate not only reduced demand but also exchange rate movements, concerns regarding debt and a shortage of foreign currency,” the report says.

Preliminary data for April suggests the sharpest downturn for South Asia and the Middle East, which could register trade declines of up to 40pc.

Data indicates that China’s imports and exports fell by about 8pc in May.

The report shows that economic disruptions wrought by Covid-19 have affected some sectors significantly more than others.

In the first quarter of 2020, textiles and apparel declined by almost 12pc, while office machinery and car sectors fell by about 8pc.

In contrast, the value of international trade in the agri-food sector, which has so far been the least volatile, grew by about 2pc.

Preliminary data for April indicates further declines in most sectors, with a very sharp contraction in the trade of energy (-40pc) and cars (-50pc) products.

Significant decreases are also observed in chemicals, machineries and precision instruments, with drops above 10pc.

A notable side effect of the Covid-19 pandemic has been the increase in demand for medical goods and equipment, such as ventilators, monitors, thermometers, hand sanitisers, protective masks and garments.

While the international trade of such goods contracted at the onset of the pandemic, it rebounded in February and March and almost doubled in April 2020, as countries scrambled to secure medical and protective equipment.

The flow of imports and exports, the report says, followed the spread of the virus.

For example, the first two months of 2020 saw an increase in Chinese domestic demand, resulting in a jump in medical product imports, primarily from Europe and the US, which had not yet been significantly hit by the pandemic.

Meanwhile, Chinese exports of such equipment dropped by 15pc as national production shifted towards satisfying domestic need.

Data for March shows that as the pandemic took hold in Europe, imports of medical equipment jumped by 21pc in the region.

April data for the US reflects the spread of Covid-19 within the nation, with medical product imports increasing by almost 60pc while exports declined by approximately 20pc.




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