Asia may experience biggest drop in trade this year — WTO

MANILA, Philippines — Asia is one of two continents expected to experience the biggest drop in merchandise trade this year as the coronavirus disease 2019 or COVID-19 continues to disrupt economic activity, according to the World Trade Organization (WTO).   

“Nearly all regions will suffer double-digit declines in trade volumes in 2020, with exports from North America and Asia hit hardest,” the WTO said in a statement. 

WTO director general Roberto Azevedo said the organization came up with forecasts for two plausible scenarios given the uncertainty on how long the pandemic would last and its impact on the economy. 

Under an optimistic scenario, WTO expects the volume of Asia’s exports to decline by 13.5 percent this year and recover next year with an increase of nearly 25 percent. 

In a pessimistic scenario, WTO sees Asia’s exports recording a bigger drop of 36.2 percent this year and recover with a 36.1 percent growth next year. 

Asia’s exports grew by 0.9 percent last year after registering a 3.7 percent increase in 2018.

In terms of Asia’s imports, WTO projects an 11.8 percent decline this year and 23.1 percent growth next year in an optimistic setting.

Meanwhile, WTO estimates a 31.5 percent contraction in Asia’s imports this year and 25.1 percent uptick next year in a pessimistic setting.

Last year, Asia’s imports declined by 0.6 percent after rising by nearly five  percent in 2018.

When it comes to volume of global merchandise trade, WTO said it expects a 13 percent decline this year and a 21.3 percent increase next year in an optimistic scenario. 

If the pandemic is not brought under control, and governments fail to implement and coordinate effective policy responses, the decline in global merchandise trade could be 32 percent or even higher this year. 

WTO economists are of the view the decline in global merchandise trade would likely exceed the trade slump brought on by the global financial crisis of 2008 until 2009.

Even before the pandemic started, world merchandise trade was already down last year amid trade tensions and  slower economic growth.

Global merchandise trade registered a 0.1 percent decline in volume last year after rising by 2.9 percent in 2018. 

As the crisis has prompted governments to implement measures to protect individuals, Azevedo said the declines in trade and output would have consequences for households and businesses.

He said two factors would determine the strength of recovery such as how quickly the pandemic is brought under control, and policies to be implemented by governments.

“A strong rebound is more likely if policymakers show businesses and households reason to believe the pandemic was a temporary, one-time economic shock. To do this, fiscal policy, monetary policy, and trade policy must all pull in the same direction,” he said. 

As turning towards protectionism would bring in new shocks on top of those being currently experienced, he said keeping markets open to international trade and investment would help economies recover more quickly. 

“If the pandemic is brought under control relatively soon, and the right policies are in place, trade and output could rebound nearly to their pre-pandemic trajectory as early as 2021 – regardless of how steep the initial fall is,” he said. 

On the other hand, if the outbreak is prolonged and uncertainty becomes pervasive, consumers  and business may spend more cautiously.

Azevedo said the aim now should be to make the most of all potential drivers of sustainable growth to reverse the situation.

“Governments around the world can and must lay the foundations for a strong and socially inclusive recovery. Trade – and international coordination more generally – will be important ingredients here. If countries work together, we will see a much faster recovery than if each country goes it alone,” he said.