World Trade set to decline significantly due to Covid-19

In response to the Covid-19 pandemic, economists in the World Trade Organization (WTO) expect world trade numbers to slide further than they did during the 2008 financial crisis. Statistics point to a fall anywhere between 13% to 32%. Any estimates of a recovery or rebound in 2020 is conservative at best as countries struggle to cope with the virus and keep their economies going. Any accurate projection of a recovery can only be made after all major world economies bring the virus under control and only time will tell if public policy has been effective in that regard.

Global trade in the world had already been under various pressures in 2019 due to trade tension between major world powers, hence the full effect of just the pandemic is hard to properly quantify. Even when recovery comes, it is unclear if trade tensions that existed before Covid-19 will resurface and continue to suppress trade facilitation. It also remains unclear if any countries will change foreign policy and/or investment approaches in the post pandemic world, possibly choosing to direct funds and investments inwards instead of overseas.

It also remains unclear if any countries will change foreign policy and/or investment approaches in the post pandemic world, possibly choosing to direct funds and investments inwards instead of overseas.

One optimistic outlook is for a sharp recovery for domestic markets after lock-down measures have been lifted. This is possible since an ease in lockdown measures will reopen large industries that have been shut down in many countries such as tourism, hospitality, non-essential trade and manufacturing. With a reopening of these industries, employment rates will also sharply increase resulting in an overall increase in disposable income, although in most scenarios it will take a long time to reach pre pandemic levels of activity.

Investment opportunities may make themselves available to investors who can afford them, since many small and medium sized businesses will be eager for a cash injection to get businesses up and running again. Many of these businesses would also be experiencing cash flow problems after expensing savings on fixed costs throughout the lock down period. This presents a good opportunity for investors to buy into existing businesses with good pre-pandemic performance records. It also means an increase in acquisitions and mergers of small and medium sizes businesses should be expected in the second half of 2020 throughout the first half of 2021.