Economy

COVID-19: Global trade to decline 27% in Q2, warns UNCTAD

Global trade value slumped 3% in first quarter of 2020, according to the report

 
By Shagun Kapil
Last Updated: Wednesday 13 May 2020
Global trade set to decline 27% in second quarter: UNCTAD report. Source: Flickr

The novel coronavirus disease (COVID-19) pandemic and the subsequent lockdown has triggered a slump in global trade by three per cent in the first quarter of 2020, as compared to the last quarter of 2019. The second quarter will not offer any respite either — it is further projected to plummet 27 per cent from April-May, 2020. 

The projections by the United Nations Conference on Trade and Development (UNCTAD) were published in a joint report by 36 international organisations.

The report by the Committee for the Coordination of Statistical Activities (CCSA) attributed the lower value in global trade to falling commodity prices due to plummeting world oil prices since December 2019.

UNCTAD’s free market commodity price index, which measures price movements of primary commodities exported by developing economies, dropped 1.2 per cent in January; 8.5 per cent in February; and 20.4 per cent in March. 

The fall in March was a record in the history of the free market commodity price index (FMCPI). 

“The maximum month-on-month decrease was 18.6 per cent during the global financial crisis of 2008. The descent lasted six months at that time. Worryingly, the duration and overall strength of the current downward trend in commodity prices and global trade remain uncertain,” said the report. 

It added that plummeting fuel prices was the main driver of the steep decline, plunging 33.2 per cent in March. Prices of minerals, ores, metals, food and agricultural raw materials tumbled by less than four per cent. 

The report is a product of cooperation between the international statistics community and national statistical offices and systems around the world, coordinated by UNCTAD.

“Governments everywhere are pressed to make post-COVID-19 recovery decisions with long-lasting consequences,” UNCTAD Secretary-General Mukhisa Kituyi said.

The aviation industry has borne the weight of the consequences of COVID-19 outbreak heavier than other industries — with rapid and drastic declines in air travel demand amplified by stringent travel restrictions. 

The report stated:

With around 90 per cent of fleet being grounded and travel demand hitting nearly zero, traffic reduction has far exceeded the level observed in events such as Severe Acute Respiratory Syndrom outbreak and terror attacks of 11 September 2001. This has put the aviation industry under extreme strain.

The tourism sector is also facing an unprecedented crisis, the report said. Some possible scenarios point to a decline of 60-80 per cent in international tourist arrivals for 2020. 

Meanwhile, global manufacturing growth, which was already decelerating in 2019 due to trade tensions among dominant economies, was hit further. The aggregate for world manufacturing production showed a sharp decline caused by a large share of China in global manufacturing, the report added. 

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