In the midst of the pervasive impacts of COVID-19 there is plenty of room for doom and gloom.
With many businesses busy calculating how long they can survive before the cash runs out, stark headlines about the projected impact on trade merely confirm what is being lived through each day. The WTO (World Trade Organisation) gained some headlines recently with projections that World Trade will fall between 13-32% in 2020 under the weight of current disruption. A picture starkly illustrated by the enclosed chart included with the announcement:
A supporting link is provided because the full announcement is worth a read: https://www.wto.org/english/news_e/pres20_e/pr855_e.htm
WTO places into context why such a wide spectrum of outcomes is possible with current uncertainties. This is primarily a health crisis with significant economic impacts, not least resulting from necessary Government responses. Much depends on the length of the outbreak and the effectiveness of policy responses. Both are pieces within an emerging picture.
Whilst parallels can be drawn with the financial crisis of 2008/9 there are some important differences. In a preliminary assessment, published in March, the World Bank highlighted four categories of ‘shock’ to trade, particular to the virus, essentially:
- Lower availability of labour
- Increased costs and barriers to trade (required to ensure safety)
- Drops in tourism
- A switch in demand away from purchases requiring human interaction
Whatever the policy response it is reasonable to conjecture that some of these will take longer than others to unwind, which in turn will inform the speed of recovery in related sectors.
With a further potential shock scheduled for the beginning of 2021, in the form of a finalised Brexit, one can only hope that the tenor of related negotiations will take place in a climate informed by an understanding of mutual vulnerability.