Global trade is set for a significant rebound in 2021, following a historic Covid contraction, but uncertainties remain, said Dr. Tomasz Brodzicki, senior economist at IHS Markit.
IHS Markit’s Global Trade Atlas forecasts real value of global trade, adjusted for inflation, to surge a year-over-year 7.6 percent this year and 5.2 percent in 2022. This follows an estimated contraction of 13.5 percent in 2020 to $16.4 trillion.
Brodziki’s “Global Trade Outlook for 2021” said direct trade effects of Covid-19 were related to supply disruptions hindering production, increased transport cost due to implementation of stricter rules, supply-chains contagion effect that amplified the direct supply shocks and demand disruptions due to a decrease in the aggregate demand, and precautionary or wait-and-see purchase delays.
Brodzicki said the growth this year is attributed to the projected recovery in global gross domestic product (GDP) in 2021 and a “particularly strong growth impulse expected in the second quarter.” The predicted compound annual growth rate (CAGR) for the real value of global trade for the period of 2021 to 2030 is 3.5 percent, he noted.
IHS Markit estimates a contraction of 11.2 percent year over year in global trade in 2020 to 12.7 billion metric tons and forecasts a 7.5 percent growth in 2021 and a 4.1 percent increase in 2022. This will enable the global economy and in particular the transport community to regain momentum and to recoup some of the losses from the trade collapse of 2020, IHS noted. The forecasted CAGR for global trade volume stands at 3.2 percent in the period of 2021 to 2030.
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“The estimated contraction (11.2 percent) in global trade volume in 2020 is higher than the contraction (7.7 percent) in the global financial crisis,” Brodzicki said. “Economic developments will critically depend on the shape of the pandemic curve and the severity of containment efforts taken globally and by individual states, as well as the effectiveness of vaccination programs globally.”
Although the Covid-19 vaccines have been developed with unprecedented speed, the effects of vaccination programs are unlikely to be felt globally before the third or fourth quarter of 2021, he said, as larger parts of the population gain immunity.
However, many uncertainties still remain and are likely to observe more pronounced adjustments to global value chain and trade patterns the longer the pandemic lasts, Brodzicki said. Other important qualitative factors that could affect global trade in 2021 include the side-effects of Brexit, functioning and progress of the Regional Comprehensive Economic Partnership (RCEP) Agreement in participating nations, the new U.S. administration’s trade agenda taking a more multilateral trade policy approach or elections in countries like Germany resulting in a power shift impacting German and European Union policies.