WTO upgrades 2021 goods trade forecast on strong rebound

WTO upgrades 2021 goods trade forecast on strong rebound

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  • World merchandise trade volume is expected to grow 10.8% in 2021 and to slow to a 4.7% growth in 2022
  • Quarterly trade growth was up 22.0% year-on-year in second quarter of this year but is expected to slow to 6.6% by the fourth quarter
  • Global GDP will grow 5.3% in 2021, but should slow to 4.1% in 2022
  • Downside risks now predominate, including strained global supply chains and COVID-19 outbreaks
  • Regional disparities will remain large

The World Trade Organization (WTO) has raised its global merchandise trade volume growth forecast for 2021 and 2022 as the resurgence of global economic activity in the first half of 2021 lifted merchandise trade above its pre-pandemic peak.

The WTO is now predicting merchandise trade volume growth of 10.8% in 2021, up from 8.0% forecast in March. The large annual growth rate for 2021 mostly reflects the previous year’s slump, which bottomed out in the second quarter of 2020.

Due to a lower base, growth in the second quarter of 2021 was 22.0% year-on-year, 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.

In 2022, merchandise trade is expected to rise by 4.7% (up from 4.0% previously), the growth moderating as goods trade approaches its pre-pandemic long-run trend.

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

“Trade has been a critical tool in combatting the pandemic, and this strong growth underscores how important trade will be in underpinning the global economic recovery,” WTO 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.”

Trade volume growth is set to be accompanied by GDP growth of 5.3% in 2021 and 4.1% in 2022. 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 forecast is close to the upside scenario shown in the last trade forecast, but downside risks now predominate. They include spikes in inflation, longer port delays, higher shipping rates, and extended shortages of semiconductors, with supply side disruptions being exacerbated by the rapid and unexpectedly strong recovery of demand in advanced and many emerging economies.

The pandemic itself presents potentially even bigger risks to world trade and output, particularly if more deadly variants were to emerge.

Regional disparities will remain large. In particular, the Middle East, South America and Africa look set to have the weakest recoveries on the export side, while the Middle East, the Commonwealth of Independent States (CIS), and Africa will have the slowest recoveries on the import side.

The forecast projects export volume growth in 2021 will be 14.4% for Asia, 9.7% in Europe, 8.7% in North America, 7.2% in South America, 7.0% in Africa, 5.0% in the Middle East, and 0.6% in the CIS.

Imports in the same year are set to grow by  19.9% in South America, 13.1% in CIS, 12.6% in North America, 11.3% in Africa, 10.7% in Asia, 9.3% in the Middle East, and 9.1% in Europe.

Meanwhile, services trade is likely to lag behind goods trade, particularly in sectors related to travel and leisure.

The WTO’s most recent Services Trade Barometer of September 23 suggests that trade in services may be stabilizing along a lower trend than before the pandemic.

Photo by CHUTTERSNAP on Unsplash

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