The WTO’s latest Trade Statistics and Outlook, issued on June 22, pointed out that world trade fell sharply in the first half of the year as the COVID-19 pandemic upended the global economy. However, rapid government responses helped temper the contraction, and trade volumes are unlikely to reach the worst-case scenario projected earlier. WTO Director-General Roberto Azevêdo said the fall in trade is the steepest on record, but it has not declined to the previously estimated worse level, so this is genuinely positive news and there is an important silver line here.  

 1. The decline in global trade is a historical record but still better than the forecast. Due to the COVID-19 outbreak and associated lockdown measures, the volume of merchandise trade shrank by 3% year on year in the first quarter, and initial estimates for the second quarter indicate a year-on-year drop of around 18.5%. These declines are historically large, but could have been much worse. The WTO's April forecast set out two plausible paths: a relatively optimistic scenario in which the volume of world merchandise trade in 2020 would contract by 13%, and a pessimistic scenario in which trade would fall by 32%. As things currently stand, trade would only need to grow by 2.5% per quarter for the remainder of the year to meet the optimistic projection, and the possibility of the pessimistic scenario looks less likely.    

2. Global trade may have possibly bottomed out in the second quarter of 2020. Strict lockdown measures and restrictions on travel and transport are now increasingly being relaxed in many countries, with some indicators of economic rebound. Global commercial flights were down 74% between January 5 and April 18, and have since risen 58% through mid-June. Container port throughput also appears to have staged a partial recovery in June. Meanwhile, indices of new export orders from purchasing managers' indices also started to recover in May after record drops in April. Purchases of consumer durables such as automobiles have also rebounded from May, signaling renewed consumer confidence.   

3. Trade recovery in 2021 may be lower than expected. Adverse developments and uncertainties, including a second wave of COVID-19 outbreaks, weaker than expected economic growth, or widespread recourse to trade restrictions, could see trade expansion fall short of earlier projections. A slower-than-expected pace of economic recovery would weigh on trade growth, with the volume of merchandise trade expected to rise by 5% in 2021, well below the growth rate of 20-24% in April, and global trade will not bounce back to the pre-pandemic level (in 2019).   

4. Trade responded less to economic slowdown than it did during the financial crisis. Compared with the financial crisis of 2008, a less negative trade response to declining GDP growth was observed. There are several reasons behind this. First, fiscal and monetary policies have arguably been rolled out more quickly and on a larger scale in the current crisis than they were in the financial crisis. Second, income support to households and expectations that the pandemic would eventually ease may have encouraged consumers to maintain consumption levels at a higher level than expected. Finally, much of the decline in output has been concentrated in non-tradable services such as hospitality, entertainment and personal services, which tend to be less import-intensive than manufacturing.   

The report emphasized that due to the uncertainty of COVID-19, developments need to be closely monitored before drawing any definitive conclusions about the recovery. Policy decisions have been critical in softening the ongoing blow to output and trade, and they will continue to play an important role in determining the pace of economic recovery. For output and trade to rebound strongly in 2021, fiscal, monetary and trade policies will all need to keep pulling in the same direction.