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WTO sees softer-than-expected global trade drop

Global trade, devastated by the coronavirus crisis, will shrink by less than expected this year but the rebound will also be much weaker than previously forecast, the World Trade Organization (WTO) said on Tuesday, October 6.

Revising its prior "optimistic scenario" forecast of at least a 12.9% contraction in 2020, the WTO said it now expected global trade to shrink by just 9.2% this year.

But it will then grow by only 7.2% next year, rather than the previous 21.3% estimate issued in April, the WTO added.

"World trade shows signs of bouncing back from a deep, COVID-19-induced slump, but WTO economists caution that any recovery could be disrupted by the ongoing pandemic effects," the global trade body said in a statement.

It further warned that the pace of trade expansion could slow sharply once pent-up demand is exhausted and business inventories have been replenished.

More negative outcomes were also possible if there is a resurgence of the coronavirus between now and the end of the year, it said.

Global gross domestic product (GDP) will fall by 4.8% in 2020 before rising by 4.9% in 2021, the WTO forecast.

"Consensus estimates now put the decline in world market-weighted GDP in 2020 at minus 4.8% compared to minus 2.5 percent under the more optimistic scenario outlined in the WTO's April forecast," the organization said.

"GDP growth is expected to pick up to 4.9% in 2021, but this is highly dependent on policy measures and on the severity of the disease."

Lockdown risk to growth

WTO deputy director-general Yi Xiaozhun said a resurgence of COVID-19 requiring new lockdowns could reduce global GDP growth by 2 to 3 percentage points, and shave up to 4 percentage points off of merchandise trade growth in 2021.

"The incidence of COVID-19 worldwide has fallen from a peak in the spring, but it remains stubbornly high in many areas," Yi told reporters at the WTO's headquarters in Geneva.

"Trade has played a critical role in responding to the pandemic, allowing countries to secure access to vital food and medical supplies.

"One of the greatest risks for the global economy in the aftermath of the pandemic would be a descent into protectionism."

The WTO said that rapid deployment of an effective vaccine against the virus could boost confidence and raise output growth by 1 to 2 percentage points in 2021.

"This would add up to 3 percentage points to the pace of trade expansion," it said.

The coronavirus has killed nearly 1.05 million people while at least 35.5 million cases have been registered since the outbreak emerged in China last December, according to a tally from official sources compiled by Agence France-Presse. – Rappler.com