Global trade may slump by 32% amid COVID-19 shutdowns
The global economy and world trade are being battered by the widespread and comprehensive measures to limit the spread of COVID-19, with speculations that the trade might slump by 32 per cent this year.
A shipping consultancy agency, BIMCO, in its latest report, yesterday, said it expects a sharp recovery of shipping demand and economic activity in general, but the economy would rather face a long and uncertain climb back.
It said the post-pandemic world would be faced with lower consumer spending power, lower consumer confidence, and lower overall demand, among others, both domestically and internationally.
BIMCO noted that the slow re-opening of economies around the world also increases the risk of a new wave of infections and a return to more stringent lockdown measures, all of which will weigh heavily on government, business and consumer decisions until the crisis has passed.
Citing figures from the World Trade Organisation (WTO), BIMCO said: “In its most optimistic view, global trade will fall by 13 per cent in 2020, whereas its pessimistic outlook sees trade falling by 32 per cent from 2019 levels, with a recovery in 2021 that will not return volumes to pre-pandemic levels.
“BIMCO believes the actual drop will be somewhere between these two figures, depending on how long it takes for the pandemic to be brought under control, and how governments around the world are able to coordinate and implement effective stimulus measures to get their economies back up and running,” it stated.
It noted that the global oil demand is massively impacted, and lower demand will be felt by shipping, despite a short-term boost caused by the oil price war in April.
The report, however, recommended that a coordinated response ensure a smooth recovery of globalisation and the global economy as soon as possible.
“Countries must avoid turning towards protectionism. On this front, worrying signs are emerging. In particular, the trade war between the U.S. and China, which had been experiencing a truce since the signing of the ‘Phase One’ agreement in January – risks flaring back up, as the U.S. threatens more tariffs on imports from China in a response to its handling of the Covid-19 outbreak. It goes without saying, this will only hamper both economies’ recoveries, at a time when they both need plenty of help rather than further stifling,” it stated.
BIMCO added that: “The speed and scale of the slowdown in economic activity in nations around the world are unprecedented, and, while the threat from the virus remains, the duration of this crisis and the speed at which the nations will emerge from the slowdown are highly uncertain. The massive stimulus packages materialising around the world – including wage compensation for workers otherwise at risk of unemployment, cheques from the government and deferred tax payments – all aim to ensure that as much of the economy as possible is still standing once the health crisis eases. Even so, an economic crisis will follow.”
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