WTO Warns 2021 “Could Slow Sharply” After Better-Than-Expected Rebound So Far

The World Trade Organization’s latest global trade report shows signs of a rebound from the virus-induced downturn earlier this year, but the 2021 recovery still remains highly uncertain. 

WTO upgraded its forecast for global trade in goods, which was published in a report Tuesday on its website. The upgraded does not mean world trade is out of the woods yet because the level was still at levels last seen during the dark days of the global financial crisis a decade ago. 

The report now estimates a 9.2% drop in the volume of world merchandise trade for 2020, followed by a “weaker recovery” scenario of 7.2% in 2021.

“These estimates are subject to an unusually high degree of uncertainty since they depend on the evolution of the pandemic and government responses to it,” WTO wrote in the report. 

WTO’s April forecast estimated merchandise trade would plunge between 13 and 32% this year, the collapse in trade was described by WTO Director-General Roberto Azevedo as “ugly” in April, before rebounding 21 and 24% in 2021. 

Strong trade performance in June and July “brought some signs of optimism for overall trade growth in 2020,” the report said.

WTO warned the pace of economic activity “could slow sharply once pent up demand is exhausted, and business inventories have been replenished. More negative outcomes are possible if there is a resurgence of COVID‑19 in the fourth quarter.”

WTO published a chart pack to visualize how the COVID-19 induced slump broke world trade. 

World merchandise trade plateaued in 2018, began sliding in 2019, then the virus-induced global recession created a shock. It wasn’t until global central banks and governments pumped trillions of dollars into financial markets to save the global economy from imploding. However, it’s the rule of diminishing returns; the next round of stimulus won’t be as powerful to lift global economic activity as slowdown fears emerge due to a resurgence of the virus. 

World merchandise trade plunges in 2020 with an uncertain recovery in 2021. 

Here are the optimistic and pessimistic scenarios of world merchandise trade. 

Declining merchandise exports and imports by region. 

World services trade activity index in freefall. 

Automobiles, travel goods, footwear, clothing, and iron and steel were some of the goods experiencing the worst declines. 

While outlooks continually change, the World Bank recently said a full global recovery could take upwards of five years.