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Law360 (October 6, 2020, 6:12 PM EDT ) Global trade may be bouncing back from the financial disaster precipitated by the COVID-19 pandemic, but this recovery could still be thwarted by the ongoing global health emergency, the World Trade Organization said Tuesday.
WTO financial analysts now forecast a 9.2% decline in world merchandise trade for 2020 — a rosier picture than what was predicted at the onset of the COVID-19 pandemic, when the WTO warned that global trade could fall at rates unseen since World War II.
"The performance of trade for the year to date exceeded expectations due to a surge in June and July as lockdowns were eased and economic activity accelerated," the WTO said.
This growth may "sharply" slow once pent-up consumer demand is met and businesses have fully restocked their wares. Additionally, "more negative outcomes are possible if there is a resurgence of COVID-19 in the fourth quarter," the trade body cautioned.
The WTO announcement is an improvement on an April report in which the WTO forecasted that trade could fall as much as 32% or as little as 12.9%.
But recent data suggests that pandemic-triggered trade contraction may be less severe than even its more optimistic April forecast. Currently, the WTO said, global trade is on track to rise by 7.2% in 2021.
However, the WTO refused to discount the "distinct possibility" that global trade would not fully return to its pre-COVID-19 trends, noting that its 2021 estimates more closely aligned with economists' forecasts for a weak economic recovery than a "quick return to trend."
The WTO further cautioned that this burgeoning recovery could be undermined by future COVID-19 outbreaks. Moreover, whether the recovery could be sustained would largely depend on investing activities and employment, the WTO said.
WTO Deputy Director-General Yi Xiaozhun pointed out that though recorded incidents of COVID-19 hit its peak in the spring, the virus is still active in many areas.
"Trade has played a critical role in responding to the pandemic, allowing countries to secure access to vital food and medical supplies," he said. "One of the greatest risks for the global economy in the aftermath of the pandemic would be a descent into protectionism."
Despite improvements to the general trade outlook, the WTO noted that the global gross domestic product fell more than expected during the first half of 2020. By the end of 2020, global GDP will fall by 4.8%, instead of the 2.5% decline economists predicted in April, the WTO said.
--Additional reporting by Sarah Martinson. Editing by Daniel King.
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