The recovery of global economic activity in the first half of 2021 pushed merchandise trade above its pre-pandemic peak, urging World Trade Organization (WTO) economists to upgrade their trade forecasts for 2021 and 2022 to 10.8 percent growth in 2021, up from 8 percent in March, and 4.7 percent growth in 2022.
Growth should lessen as merchandise trade approaches its pre-pandemic long-run trend. Supply-side issues such as semiconductor scarcity and port backlogs may strain supply chains and weigh on trade in particular areas, but they are unlikely to have a significant influence on global aggregates. The biggest downside risks come from the pandemic itself.
According to WTO, behind the strong overall trade increase, however, there is significant divergence across countries, with some developing regions falling well short of the global average.
Ngozi Okonjo-Iweala Director-General WTO
“Trade has been a critical tool in combatting the pandemic, and this strong growth underscores how important trade will be in underpinning the global economic recovery. But inequitable access to vaccines is exacerbating economic divergence across regions. The longer vaccine inequity is allowed to persist, the greater the chance that even more dangerous variants of COVID-19 will emerge, setting back the health and economic progress we have made to date.”
The high annual growth rate for merchandise trade volume in 2021 reflects the previous year’s downturn, which bottomed out in Q2 of 2020. Year-on-year growth in Q2 of 2021 was 22.0 percent due to a lower base, but the figure is projected to drop to 10.9 percent in Q3 and 6.6 percent in Q4, due to the rapid recovery in trade in the last two quarters of 2020.
Reaching the forecast for 2021 only requires quarter-on-quarter growth to average 0.8 percent per quarter in the second half of this year, equivalent to an annualized rate of 3.1 percent.
Trade volume growth is set to be accompanied by market-weighted GDP growth of 5.3 percent in 2021 and 4.1 percent in 2022. Strong monetary and fiscal policy support, as well as the restoration of economic activity in countries that have been able to deploy COVID-19 vaccinations at scale, have boosted GDP growth.
According to current trade forecasts, the ratio of trade growth to GDP growth will rise to 2.0:1 in 2021 before falling back to 1.1:1 in 2022. If the forecast is correct, the pandemic will not have had a significant structural influence on the link between global commerce and income.
The forecast projects export volume growth in 2021 to be 8.7 percent in North America, 7.2 percent in South America, 9.7 percent in Europe, 0.6 percent in the Commonwealth of Independent States (CIS), 7.0 percent in Africa, 5.0 percent in the Middle East and 14.4 percent for Asia.
Imports in the same year are set to grow by 12.6 percent in North America, 19.9 percent in South America, 9.1 percent in Europe, 13.1 percent in CIS, 11.3 percent in Africa, 9.3 percent in the Middle East and 10.7 percent in Asia. Exports and imports of least-developed countries (LDCs) will increase by an estimated 5.3 percent and 5.5 percent, respectively, in 2021.
Annual trade growth figures for 2021 are to a considerable extent a function of the decline suffered by each region in 2020. The pandemic’s impact on trade is better illustrated by looking at cumulative growth over the two years from 2019 to 2021. If the second half of this year turns out as expected, world merchandise trade will be up 4.9 percent compared to 2019.
