Covid-19 and World Trade – Part 1

In this current, Covid-19 inspired, world crisis, a great many nations are feeling compelled to close non-vital parts of the economy and request individuals to stay at home; measures aimed at checking the spread of the Covid-19. This continuing situation is turning into a financial and social emergency that requires a strong and appropriate governmental reaction.

A considerable number of individuals already worried about the wellbeing of friends and family presently are also facing the possibility of joblessness and the associated financial and emotional pain. Many developing economies face both economic and societal problems, as exports drop alarmingly; so too the price of tradeable goods. Besides, there are the problems of capital flight from and money sent home, in the form of remittances, drying up.

Economic trade has been severely damaged on an international scale. Supply chains have been brutally interrupted by the crisis with no part of the world’s economy untouched. The money generated in by tourism and the travel industry has all but disappeared.

Falling flight capacity has seen a significant decrease in freight cargo by this means. Shipping cargo, which moves the vast majority of tradeable goods around the world, has hitherto been saved large-scale disruption, apart from crewmen stranded by Covid-19 travel limitations. Financial traders are also finding it hard to fulfil trades due to the upset that has been placed on the global trading market.

Light at the end of the tunnel

WTO (World Trade Organization) financial analysts estimate that world product exchange volumes this year will fall by somewhere in the range of 13% and 32%. Recently released these projections are dependent upon the vagaries of how Covid-19 and its monetary side effects will develop.

To give these projections some context, the most favourable situation would still be worse than the financial crisis of 2008/9 when a drop of 12% was recorded. The worst-case situation would be comparable to the fall in world exchanges seen during the initial three years of the Great Depression, which started in 1929.

While trying to avoid companies falling into liquidation on a massive scale and the resultant unemployment rises this would undoubtedly cause, nations across the globe, led by their central banks, are pumping massive amounts of liquidity into the system to try to avoid this collapse. The unchartered nature of this pandemic and the resulting crash makes governments reaction very different to usual courses of action. Rather than boosting the economy to get individuals working and expending once more, nations are instead spending massive amounts of money to ensure non-core employees remain at home.

Indeed, even as the emergency seethes around them, governments are working frantically to prepare for its end. On the monetary front, this implies establishing the frameworks for a robust and socially comprehensive package of stimuli. Governments across the world, together with supra-national entities such as the IMF and the World Bank, are acting decisively. These institutions are coming together to try and solve the problems caused by this prolonged and highly unexpected series of events.

The good news is that an economic upswing, even a return to pre-Covid levels, is achievable. The essential components of the economy are still in rude health; in effect, they are dormant rather than dead and are ready to be started up again. To achieve this government needs to give a strong direction towards the path to recovery, thus instilling confidence in all sectors of the economy. WTO financial experts gauge that if we get a grip on the virus sooner rather than later, trade both nationally and internationally might bounce back almost to their pre-pandemic levels by as quickly as 2021.


International Sales Office