INTERNATIONAL Monetary Fund (IMF) officials have projected a 10.4% contraction in global trade during the course of 2020 as a result of the economic impact of the coronavirus virus pandemic sweeping across the globe.
Due to the impact of the pandemic, economies have been shutdown, industrial output is in decline and trade has diminished significantly. As a result, the IMF has forecast that there will be a negative global economic growth rate of -4.4% during the course of this year with international trade suffering immensely.
In its just-released biannual World Economic Outlook (WEO) report, the IMF also revealed that foreign direct investment flows as a share of global gross domestic product are well below their pre-pandemic levels. Its economists revealed that this is expected to remain as such in the near future.
Titled World Economic Outlook 2020: A Long and Difficult Ascent, the IMF report highlighted the importance of climate action and the role that the multilateral system must play to defuse trade and technology tensions, which can enable countries to meet their emissions goals and climate change. According to the WEO, the fund expects a long and difficult ascent from the Covid-19-induced global recession, citing the United Nations Conference on Trade and Development’s (Unctad) updated data on trade and investment trends.
Also, the report stated that although projections are less severe than forecast in the June 2020 WEO update, the global economy recovery will be uneven and remains uncertain. It added that whereas some regions are returning to growth more rapidly than anticipated, economic prospects in several emerging markets continue to worsen as Covid-19 infections rise.
While reviewing global prospects and highlighting that the recovery is prone to setbacks, the report added that global trade began recovering in June as lockdowns were eased, although the return to growth was driven by China. Similarly, a Unctad Global Trade update projected a 9% fall in global trade, noting that the figure is subject to continued uncertainty.
UNCTAD found that in the third quarter of 2020, exports decreased in nearly every country except a select few in Eastern Asia. However, it observed that if the economic impacts were primarily driven by government-imposed restrictions, then a quick economic recovery might be expected.
The WEO estimated the rate of global economic growth at -4.4% for 2020, followed by 5.2% in 2021. This is less severe than the 2020 forecast in June but also a lower recovery rate for the coming year.