Recovery in Global Trade to Stall Again in First Quarter
The COVID-19 pandemic has caused a global economic crisis. In the second quarter of 2020, the volume of world merchandise trade shrunk by 15% year-on-year, as commercial services exports fell by 20% and travel services were down 63%. Moreover, the developing countries faced economic contraction rates varying from 5% to 10% while also experiencing drops in their national incomes at an average of 5%. The unemployment rate also increased 2.9 percentage points to 8.4% in April 2020, compared to 5.5% in March, according to the OECD. The pandemic has worsened the already struggling global economy, with its effects continuing throughout the first quarter of 2021.
While nearly all industries were hit by the pandemic, the international trade sector has been exceptionally affected. The volume of travel has decreased by 15% in the world, supply chains have been damaged, there were labor shortages at ports which further slowed the movement of goods, and there was a significant drop in demand for certain goods and services. Luckily, global trade in goods increased nearly 8% in the fourth quarter compared to the third quarter, thanks to developing countries like the ones in East Asia trading actively. According to the UNCTAD, most manufacturing sectors rebounded in the fourth quarter, and “East Asian economies have been leading the recovery process with strong export growth and gains in global market share.” However, trade in services remained stagnant at levels last seen in the third quarter, causing the UNCTAD to predict a 1.5% drop in trade in goods, along with a 7% fall in trade in services for the first quarter of 2021. Thus, many were depending on vaccine development for a quick global recovery.
Unfortunately, vaccine distribution is taking longer than most had initially expected. The main reason behind this is the limited capacity of vaccine production. Even developed European countries were not able to produce enough vaccines for their citizens, and only a few countries were able to vaccinate half of their populations. Moreover, side effects and other safety concerns have led to a rise in global vaccine hesitancy. This means that the pandemic may continue for a few more years, considering that many least developed countries are still experiencing difficulty securing vaccines.
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