While world trade was already slowing down prior to the COVID-19 pandemic, the economic and social disruptions brought by COVID-19 are resulting in a dramatic decline in trade. The value of international trade in goods has declined by about 5% in Q1 2020 and is expected to decline further by 27% in Q2 2020.
Leading indicators, such as the Purchasing Manager Indices (PMIs), also signal further deterioration of international trade in the second quarter. While PMIs tracking international trade indicate that the pace of contraction has slowed in May, they have remained well below the 50 points benchmark.
International trade is likely to remain below the levels observed in 2019 in the second half of the year. The magnitude of which will be dependent upon not only additional economic disruptions brought by the COVID-19 pandemic but also on the type and extent of policies that countries will adopt to restart their economies.
Assuming persisting uncertainty, UNCTAD expects a decline of around 20% for the year 2020. This is in line with World Trade Organization, which expects that the decline in international trade will be between 13% and 32%. The European Commission expects that EU27 trade will decline by 10% to 16% in 2020.
The wide range of estimates is a sign of the still high uncertainty about the possibility of any economic recovery in the second half of the year.
