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Despite dire warnings of a precipitous drop in global trade as a result of the Covid-19 pandemic, the latest figures from the World Trade Organization (WTO) show that trade volumes recovered more quickly than expected in 2020, while the outlook for 2021 is relatively positive – albeit with several important caveats.

In its latest trade forecast, the WTO predicts that world merchandise trade volume will increase by 8% in 2021 and 4% in 2022. The organisation also published its final figures for trade in 2020, which show a year-on-year contraction of 5.3% in 2020 – a far cry from the drop of as much as 32% it warned of in April last year, when over half the global population was under lockdown orders.

“The sheer extent of pandemic-related uncertainty led the WTO’s trade forecast to explore two distinct scenarios for how Covid-19 would impact global trade,” the report says. The first was a relatively optimistic scenario, with a sharp drop followed by a recovery starting in the second half of 2020, while the second was a more downcast outlook, with a steeper initial decline and slower recovery.

“It quickly became apparent that the optimistic scenario was the one actually unfolding, which the WTO announced in June 2020,” the WTO says. However, even this scenario overstated the extent of the decline: the initial April estimate of a decrease of 12.9% was revised upwards to a decline of just 9.2% by October, with the final figure coming in at just over half that.

According to the WTO, the smaller-than-expected contractions in both economic growth and trade were largely due to strong monetary and fiscal policies by many governments. “Much greater in scale and geographic coverage than the response to the 2008-2009 global financial crisis, these policies helped prevent a larger drop in global demand, which would have reduced trade further,” the report says.

The WTO also points to trade policy restraint by its members as a contributing factor. In its latest annual overview of trade-related developments, published in December, the organisation found that, during the course of 2020, restrictive trade measures imposed at the start of the pandemic were rolled back, and new liberalising measures were introduced.

“I think it’s fairly safe to say that trade has done relatively well,” says Robert Koopman, WTO chief economist. “There have been significant concerns about export restrictions and policy measures being put in the path of trade and slowing its growth but overall, it’s been relatively robust. I think that says something about the underlying fundamentals, the foundation of the WTO and the agreements in that members feel restrained in invoking measures that might impede trade. Now, should they feel more restraint? Maybe. That’s up to them. But overall, it appears that trade has been providing a strong underpinning so far for a potential recovery.”

A closer look at the figures, however, shows an uneven picture. Exports from North America, Europe, Africa and the Middle East all declined by at least 8%, while the Commonwealth of Independent States (CIS) region and South America managed to keep export declines under the global average, posting drops for 2020 of 3.9% and 4.5% respectively. Only Asia posted positive export growth for 2020, of 0.3% – effectively bringing up the average for the rest of the world.

The WTO attributes this both to the relatively small impact that Covid-19 had on certain Asian economies, and to the fact that the region has been supplying the world with consumer goods and medical supplies during the pandemic, driving up regional export totals.

This echoes the findings of UNCTAD’s new Global Trade Update, published on February 10, which highlights the “very strong” performance of East Asian economies in particular. On a year-on-year basis, trade in goods originating from that region grew about 12% in the final quarter of 2020, with goods imports increasing by about 5%, the report says.

Looking forward, the relatively positive short-term outlook for global trade to 2022 continues to be marred by regional disparities. On the import side, Africa, South America and the Middle East will continue to see their merchandise trade stagnate while other regions will pull ahead. On the export side, most regions will only see modest gains while Asia continues to supply large quantities of goods to global markets.

Lagging vaccination timetables, particularly in developing countries, are also holding back a universal trade recovery, says WTO director general Ngozi Okonjo-Iweala, adding: “A rapid, global and equitable vaccine roll-out is the best stimulus plan we have for the strong and sustained economic recovery that we all need.”