The recovery of world trade following the COVID-19 crisis reached its highest level in the first quarter of 2021, with a 10% increase over the same quarter in 2020 and a 4% increase over the last quarter of last year, according to a recent update by the United Nations Conference on Trade and Development (UNCTAD). While the year started strong, there is still more that needs to be done, and new COVID-19 issues are threatening the recovery. Randall Castillo Ortega, an entrepreneur and import/export authority, explains how the global trade industry is operating amid the recovery process.
According to the UNCTAD report, the impressive rebound in the first quarter of 2021 continued to be driven by the good export performance of East Asian economies, whose success in mitigating the pandemic allowed them to recover more quickly. It also allowed them to take advantage of the massive global demand for products tied to COVID-19.
It took four quarters, after the beginning of the recession caused by the pandemic, for global trade to return to previous levels. Already in the fifth quarter, the first quarter of 2021, world trade was higher than pre-crisis levels, with an increase of around 3% compared to the fourth quarter of 2019. By contrast, it took 13 quarters for global trade to recover from the 2015 recession, triggered by structural changes in East Asian economies and falling commodity prices. After the 2009 recession caused by the global financial crisis, international trade took nine quarters to recover.
According to the report, in the first quarter of 2021, the value of trade in goods was higher than the pre-pandemic level, but trade in services remains at a level well below the pre-pandemic average value. “Global trade in COVID-19-related products remained strong during the quarter,” explains Castillo.
Import and export trends in some of the world’s major trading economies show that, with a few exceptions, trade in major economies recovered from the 2020 slump. However, the large increases are due to the low levels recorded in 2020, and trade in many major economies remained below the 2019 average values. The trend towards a greater recovery of goods relative to services is common to all major economies. The UNCTAD report shows that China, India and South Africa did relatively better than other large economies during the first quarter of 2021; in particular, China’s exports registered a sharp increase not only from the average value of 2020 but also relative to pre-pandemic levels. In contrast, Russia’s exports remained at levels well below the 2019 average.
However, trade recovery remains uneven, especially among developing countries, with East Asian exports recovering at a much faster pace. “East Asian economies are the sources of trade recovery among developing countries,” explains Castillo. “However, excluding trade figures for developing economies in East Asia, trade in that particular region remains below average.”
In the first quarter of 2021, the value of exports remained below average for countries with economies in transition and those in the Middle East, South Asia and Africa. Although South American exports rose relative to the first quarter of 2020, they continued below the 2019 medium rate. In addition, the value of commodity imports and exports from developing countries was substantially higher compared to the first quarter of 2020 and the first quarter of 2019 (around 16%).
Trade continued to rebound not only in COVID-19-related sectors, such as pharmaceuticals, communications and office equipment but also in other sectors, such as minerals and agri-food. In contrast, the energy sector remained lagging, and international trade in transport equipment remained at well below average levels, according to the report. The report forecasts that trade will continue to grow in 2021, particularly in the second half of the year. The global forecast for trade in 2021 indicates an increase of around 16% from the low point of 2020 (19% for goods and 8% for services).
The value of global trade in goods and services is projected to reach $6.9 trillion in the third quarter of 2021, which equates to a year-on-year increase of around 31% relative to the 2020 low point and around 3% relative to pre-pandemic levels of 2019. But the positive outlook depends largely on the easing of pandemic-related restrictions, the persistence of a positive trend in commodity prices, the general constraints of protectionist trade policies, and favorable macroeconomic and fiscal conditions.
Financial stimulus packages, particularly in developed countries, are expected to strongly promote the revival in global trade throughout 2021. The value of world trade should also increase due to positive trends in commodity prices. Still, uncertainty remains about how trading patterns will be shaped throughout the year as new COVID-19 variants surface and new clusters of contagion are found.