WTO: Coronavirus Trade Slump Likely to Exceed 2008 Global Financial Crisis

World trade is expected is expected to fall by between 13% and 32% this year as the COVID-19 pandemic disrupts just about every aspect of the global economy, the World Trade Organization said Wednesday.

Although the unprecedented nature of the ongoing global health crisis has created uncertainty surrounding the precise economic impact, WTO economists believe the decline will likely exceed the trade slump brought on by the global financial crisis of 2008-09. 

Estimates of the expected recovery in 2021 are equally uncertain, with outcomes depending largely on the duration of the outbreak and the effectiveness of the policy responses, the WTO said. 

“This crisis is first and foremost a health crisis which has forced governments to take unprecedented measures to protect people’s lives,” WTO Director-General Roberto Azevêdo said.

“The unavoidable declines in trade and output will have painful consequences for households and businesses, on top of the human suffering caused by the disease itself.

“The immediate goal is to bring the pandemic under control and mitigate the economic damage to people, companies and countries. But policymakers must start planning for the aftermath of the pandemic,” he said.

The COVID-19 pandemic comes at a time when global trade was already slowing due to trade tensions and slowing economic growth.

The WTO says that while the economic shock of the COVID-19 pandemic invites comparisons to the global financial crisis of 2008-09, the two global events are also very different. 

“After the financial crisis of 2008-09, trade never returned to its previous trend… A strong rebound is more likely if businesses and consumers view the pandemic as a temporary, one-time shock,” the WTO said. 

“On the other hand, if the outbreak is prolonged and/or recurring uncertainty becomes pervasive, households and business are likely to spend more cautiously,” it added. 

Under both scenarios, most regions will suffer double-digit declines in exports and imports in 2020, the WTO said.

“If the pandemic is brought under control and trade starts to expand again, most regions could record double-digit rebounds in 2021 of around 21% in the optimistic scenario and 24% in the pessimistic scenario – albeit from a much lower base. The extent of uncertainty is very high, and it is well within the realm of possibilities that for both 2020 and 2021 the outcomes could be above or below these outcomes,” the WTO said.