World trade makes frail recovery but remains negative—UNCTAD report

World trade makes frail recovery but remains negative—UNCTAD report

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  • Global trade value in 2020 will contract 7%-9% compared to 2019
  • Some East Asian economies bucked the downtrend in Q3 exports, notably Taiwan, China, and Vietnam
  • Trade in home office equipment and medical supplies increased in Q3; trade further weakened in the automotive and energy sectors
  • Trade in COVID-19 medical supplies grew more than 50% since April 2020, but mostly benefiting residents of wealthier nations

Global trade will register a 7% to 9% drop in value for 2020 compared to 2019 despite signs of a rebound in the third quarter, according to a United Nations Conference on Trade and Development (UNCTAD) forecast.

UNCTAD’s “Global Trade Update” predicts a “frail recovery” for world trade in the second half of the year. Global trade declined by about 5% year-on-year in the third quarter 2020, an improvement from the 19% year-on-year decline in the second quarter 2020 but still not enough to pull trade out of the red. 

The fourth quarter is expected to decline 3% compared to the fourth quarter of 2019. This figure is still uncertain, however, due to concerns about how the COVID-19 pandemic will evolve and affect economic activity in the coming months, said the quarterly update released on October 21.
 
None of the major economies were spared the downturn in international trade, but only China has made a notable trade recovery. The country’s exports, which fell in the early months of the pandemic, stabilized in the second quarter and rebounded strongly in the third, with year-over-year growth rates of almost 10%.

In contrast to other major economies, Chinese imports stabilized in July and August and grew by 13% in September.

There was a generalized downtrend in the exports of economies in the third quarter, except for some East Asian economies which posted positive growth, notably Taiwan, China, and Vietnam.

Exports from developing countries fared better than those of developed nations. Year-on-year growth of developing economies’ exports improved from -18% in the second quarter to -6% in July, while those from developed nations increased from -22% to -14%.

By region, the sharpest decline in international trade in the second quarter of 2020 was registered in the West and South Asia regions, where imports dropped by 35% and exports by 41%. As of July, the fall in trade remained significant in most regions except for East Asia.

By sector, trade in home office equipment and medical supplies increased in the third quarter while trade further weakened in the automotive and energy sectors.
 
The report also looked particularly at trade in COVID-19 medical supplies (personal protective equipment, disinfectants, diagnostic kits, oxygen respirators and other related hospital equipment). Trade grew by an average of more than 50% since April 2020, but the increase primarily benefited residents of wealthier nations.

Overall, per capita imports of medical goods essential to mitigate the pandemic were about 100 times higher for high-income countries than for low-income nations, the update said.

UNCTAD said the difference in access to a potential COVID-19 vaccine for residents in wealthy and poor countries could be even more drastic than for medical supplies.

“While some low-income countries have the capacity to locally manufacture some protective equipment, this may not be the case for vaccines, which require stronger manufacturing and logistics capacities,” it explained.

Image by Jason Goh from Pixabay

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