The World Trade Organisation (WTO) is warning that global trade volumes could decline by as much as a third this year as a result of the Covid-19 pandemic, affecting all regions in the world and all sectors of the economy.

Director general Roberto Azevêdo says WTO economists have forecast a drop in global merchandise trade of between 13% and 32%, depending on how deep the initial shock is and whether the recovery can start to take shape in the second half of this year.

“All these projections are highly uncertain given the large number of unknown factors at play here. For instance, credit market stresses are affecting the availability of trade finance,” he says.

“Nevertheless, these numbers are ugly – there is no way around that. Comparisons with the financial crisis of 2008 and even the Great Depression of the 1930s are inevitable.”

The research follows estimates by the UN Conference on Trade and Development (UNCTAD) in March that global GDP could fall by between US$1tn and US$2tn as a result of the pandemic, as shipping lanes close, staff are placed under lockdown and production of goods slows.

The WTO says it now expects trade volumes in nearly all regions to suffer double-digit declines this year, adding that exports from North America and Asia will be hardest hit.

The Geneva-based group forecasts that North American exports will drop by between 17% and 41% this year, followed by a recovery of between 19% and 24% in 2021. The decline in exports expected in Asia is between 14% and 36%, and in Europe between 12% and 33%.

Though South and Central America is forecast to suffer a shallower decline in exports – between 13% and 31% – its imports are expected to fall by up to 44%, the highest figure for any region.

In terms of sectors, the WTO says the steepest fall in goods trade will be in those with complex value chains. It singles out electronics and automotive products as examples, with electronics manufacturing badly affected by social distancing measures such as factory closures.

On the other hand, many markets in Africa, the Middle East and the Commonwealth of Independent States are likely to see less of a dip in trade volumes. “This relatively small estimated decline in exports stems from the fact that countries from these regions rely heavily on exports of energy products, demand for which is relatively unaffected by fluctuating prices,” the WTO says.

Speaking at an online press conference on Thursday evening, the WTO’s Azevêdo acknowledged that previous financial crises had drastically different underlying causes.

In this case, he says banks are not undercapitalised and if the “fuel line to the engine” of the global economy can be reconnected, a “rapid vigorous rebound is possible”.

According to Azevêdo, the two factors that will determine the strength of any recovery will be how quickly the pandemic is brought under control, and what changes governments and policymakers put in place.

“A strong rebound is more likely if policymakers show businesses and households reason to believe the pandemic was a temporary, one-time economic shock. To do this, fiscal policy, monetary policy, and trade policy must all pull in the same direction,” he says.

“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 adds that trade and output could rebound to close to their “pre-pandemic trajectory” by 2021, even if this year’s fall is particularly steep, with the right policies in place.

Robert Koopman, chief economist at the WTO, agrees that co-ordinated international action is key. “We need countries to pay attention to fiscal policy, make sure those fiscal policies are targeted to those households that need the income the most, pay attention to small, medium sized enterprises, and make sure that they have liquidity to draw upon to open back up,” he says.

The WTO’s research methodology draws three important distinctions between the Covid-19 pandemic and the 2008 global financial crisis. In 2008, economic uncertainty led consumers to postpone purchases and businesses to delay investments. At the same time, companies reduced inventory sizes and trade finance became more expensive.

“This economic crisis is different from the financial crisis. It is provoked by a shock outside of the economy, whereas the great recession in 2008 started within the economy,” it says.

Though there is a risk trade becomes more expensive, or existing restrictions – such as limits on medical supplies – are extended to other sectors, the research says many sectors affected by social distancing measures are in non-tradeable services and so would not impact the volume of goods being shipped.


Figure 1: Estimated drop in exports by region

% change in 2020


Figure 2: Estimated change in imports by region

% change, 2020 vs 2019