The volume of world merchandise trade is expected to increase by 8% in 2021 after having fallen 5.3% in 2020, according to new estimates of the World Trade Organisation (WTO).
However, trade growth should then slow to 4% in 2022, as the effects of the pandemic will continue to be felt as this pace of expansion would still leave trade below its pre-pandemic trend, said a WTO press release.
According to the press release, the relatively positive short-term outlook for global trade is marred by regional disparities, continued weakness in services trade, and lagging vaccination timetables, particularly in poor countries.
Covid-19 continues to pose the greatest threat to the outlook for trade, as new waves of infection could easily undermine any hoped-for recovery, it reads.
"The strong rebound in global trade since the middle of last year has helped soften the blow of the pandemic for people, businesses, and economies," said Ngozi Okonjo‑Iweala, director-general of WTO.
"Keeping international markets open will be essential for economies to recover from this crisis and a rapid, global and equitable vaccine roll-out is a prerequisite for the strong and sustained recovery we all need," she added.
The WTO said short-term risks to the forecast are firmly on the downside and centred on pandemic-related factors. These include insufficient production and distribution of vaccines, or the emergence of new, vaccine-resistant strains of Covid-19. Over the medium-to-long term, public debt and deficits could also weigh on economic growth and trade, particularly in highly indebted developing countries.
The forecast shows two alternative scenarios for trade. In the upside scenario, vaccine production and dissemination would accelerate, allowing containment measures to be relaxed sooner. This would be expected to add about 1 percentage point to world GDP growth and about 2.5 percentage points to world merchandise trade volume growth in 2021.
"Trade would return to its pre-pandemic trend by the fourth quarter of 2021. In the downside scenario, vaccine production does not keep up with demand and/or new variants of the virus emerge against which vaccines are less effective. Such an outcome could shave 1 percentage point off of global GDP growth in 2021 and lower trade growth by nearly 2 percentage points," according to the forecast.
The volume of world merchandise trade plunged 15% year-on-year in the second quarter of 2020 (revised up from -17.3% in October) as countries around the world imposed lockdowns and travel restrictions to limit the spread of Covid-19. Lockdowns were eased in the second half of the year as infection rates came down, allowing goods shipments to surge back to near 2019 levels by the fourth quarter.
The impact of the pandemic on merchandise trade volumes differed across regions in 2020, with most regions recording large declines in both exports and imports. Asia was the sole exception, with export volumes up 0.3% and import volumes down a modest 1.3%.
Regions rich in natural resources saw the largest declines in imports, including Africa (-8.8%), South America (‑9.3%) and the Middle East (-11.3%), probably due to reduced export revenues as oil prices fell around 35%. In comparison to other regions, the decline in North American imports was relatively small (-6.1%).
In 2021, demand for traded goods will be driven by North America (11.4%) thanks to large fiscal injections in the United States, which should also stimulate other economies through the trade channel. Europe and South America will both see import growth of around 8%, while other regions will register smaller increases.