Covid shock could spark global Depression-era slump: WTO
Global trade could plummet by up to 32%, a level similar to the Great Depression of the 1930s, in the aftermath of the coronavirus pandemic, the World Trade Organisation said.
The best case scenario would see a 13% decline, exceeding the recession after the global financial crisis sparked by merchant banks in 2008, the Geneva-based trade body added.
WTO head Roberto Azevêdo warned against protectionism as he called for fiscal, monetary and trade policy to “pull in the same direction”.
“A turn towards protectionism would introduce new shocks on top of those we are currently enduring. Keeping markets open to international trade and investment would help economies recover more quickly,” he said on Wednesday.
“These numbers are ugly – there is no getting around that. But a rapid, vigorous rebound is possible. Decisions taken now will determine the future shape of the recovery and global growth prospects,” Azevêdo said, adding that comparisons with 2008 and the 1930s were “inevitable”.
Trade was already slowing in 2019 before the virus struck, weighed down by trade tensions and slowing economic growth, he said.
World merchandise trade registered a slight decline for the year of 0.1% in volume terms after rising by 2.9% in the previous year. Meanwhile, the dollar value of world merchandise exports in 2019 fell by 3% to $18.89trln.
Azevêdo said government's needed to “lay the foundations for a strong, sustained and socially inclusive recovery”.
“Keeping markets open and predictable, as well as fostering a more generally favourable business environment, will be critical to spur the renewed investment we will need. And if countries work together, we will see a much faster recovery than if each country acts alone."
“Two factors will determine the strength of our recovery. One, how quickly the pandemic is brought under control. And two, the policy choices governments make. A strong rebound is more likely if policymakers show businesses and households reason to believe the pandemic was a temporary, one-time economic shock.”