The World Trade Organization (WTO) on Tuesday said it expects global trade to drop around 18.5% in the second quarter of 2020, adding that restrictions being gradually lifted to contain the Covid-19 suggest that trade may have possibly bottomed out in the second quarter of 2020. The volume of merchandise trade shrank 3% year-on-year in the first quarter.
The global trade watchdog said 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 WTO economists now believe that while trade volumes will register a steep decline in 2020, they are unlikely to reach the worst-case scenario projected in April.
“The fall in the trade we are now seeing is historically large – in fact, it would be the steepest on record. But there is an important silver lining here: it could have been much worse,” said WTO’s outgoing Director-General Roberto Azevêdo.
There are several reasons why trade might respond less to changes in GDP than it did during the financial crisis. 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 2008-09. The WTO forecast scenarios did not include an attempt to model either set of policy responses, since, at the time, these policies were just being introduced. Second, income support to households and expectations that the pandemic would.
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