●WTO also confirms merchandise trade volumes were down 5.3% in 2020, though a recovery in the fourth quarter saw trade volumes recover to near pre-pandemic levels.
A recent report from the World Trade Organization (WTO) predicts a speedy recovery in global trade, yet trade volumes throughout 2021 and 2022 are still expected to be below pre-pandemic forecasts.
According to new estimates by the WTO, the volume of world merchandise trade is expected to increase by 8.0% in 2021, following a 5.3% fall in 2020.
The second quarter of 2020 saw the sharpest decline in world trade, with volumes down 15.0% YoY as a number of countries imposed nationwide lockdowns and travel restrictions. As infection rates came down and restrictions were lifted, world merchandise trade volumes recovered to near-2019 levels in the fourth quarter.
Bolstered by the robust trade volumes seen in the fourth quarter, the 5.3% decline in trade volumes in 2020 was lower than the 9.2% predicted by the WTO last October.
Director-General of the WTO, Ngozi Okonjo‑Iweala, commented "Depending on how quickly we can bring the pandemic to an end, trade could either see a major resurgence over the next two years, or it could experience a weaker, more prolonged recovery."
A faster than expected recovery in global trade was aided by major government stimulus packages - no larger than that provided in the United States. Fiscal support was offered to both employers and employees with the aim to maintain household income in-line with pre-pandemic levels. This, however, does raise concerns for the impact on trade when these stimulus packages expire.
Effective in-country management of the pandemic in China limited the economic impact in China and other Asian economies, whilst meaning vital global supply chains could also continue to function. Had greater containment measures been required in China for longer, this could have contributed to an even greater fall than the 5.3% decline in trade seen across the globe in 2020.
All regions across the world reported a large fall in the volumes of both exports and imports in 2020, with the exception of Asia which ended with a small 1.3% decline in imports and a 0.3% growth in exports. Asian exports were down 7.2% in the second quarter of 2020 but by the fourth quarter this had already been reversed by a 7.7% growth in exports when compared with the same period of the previous year. This was largely put down to the increase in exports of household goods and medical supplies in response to the pandemic.
In 2021 the demand for goods is expected to be driven by North America with imports forecasted to grow by 11.4%, followed by Europe and South America which are expected to see imports grow by around 8%. Other regions are forecasted to see smaller increases.
Following its 0.3% growth in 2020, exports from Asia are expected to grow by 8.4% in 2021. The largest percentage increase to exports is expected in the Middle East (12.4%) as global oil consumption is expected to recover from a major slump in 2020. European exports are predicted to increase by 8.3%, whilst a slightly smaller growth is forecasted for African exports at 8.1% and North American exports are expected to see a 7.7% increase.
Cross-border trade for private individuals and SMEs has largely followed the same trend seen on a macro-level for imports and exports. Data supplied to us by Money Transfer Comparison, a comparison site for individuals and SMEs who make bank-to-bank international money transfers, such as for overseas property purchases or buying international goods, shows trading volumes have picked up in recent months.
The data from Money Transfer Comparison shows foreign currency transfer volumes for individuals and SMEs were at their lowest in the second quarter of 2020, just as we would expect with global trade volumes seeing a 15.0% YoY decline in the same period. Recovery in FX trading in February 2021 is perhaps a positive indication of wider global trade volumes increasing for the year.