The availability of vaccines could be a major factor affecting economic recovery around the World, but the volume of trade in manufactured merchandise is expected to grow by 10.8 percent this year, and by another 4.7 percent in 2022, the World Trade Organization reported this week.
Exports and imports are expected to grow by only half that in Least Developed Countries like Belize, and next year’s exports are expected to lag to 4.7 percent, while imports may grow to 8.6 percent.
The surge in trade over the past three months, 22 percent when compared to the second quarter of 2020, has caused the WTO to revise its earlier estimates in March of 8 percent growth for this year and 4.0 percent for 2022. Global trade dipped sharply in the second quarter last year but recovered rapidly in the second half of last year to follow its pre-pandemic trend of growth. Thus, the WTO expects only a 6.6 percent growth over the next three months, when compared to 2020.
Freight costs have quadrupled, as indicated by the Shanghai Containerized Freight Index and shipping delays will impact supply chains.
The numbers of containers passing through international ports are near record levels. The high demand for semiconductors – microcomputers on a chip – has led to shortages, which will affect the automotive industry. The chips are also used in consumer electronics, where demand has grown strongly in advanced and many emerging economies. But the WTO does not expect these factors will affect their global aggregates much.
Trade has helped to fight the pandemic and supported economic recovery around the world. The greatest threat to this anticipated growth is the pandemic itself, and WTO Director-General Ngozi Okonjo Iweala expressed her concern: “Inequitable access to vaccines is exacerbating economic divergence across regions. The longer vaccine inequity is allowed to persist, the greater the chances that even more dangerous variants of COVID-19 will emerge, setting back the health and economic progress we have made.”
She called on WTO members to unite at the upcoming 12th Ministerial Conference in a strong response to the pandemic, with more rapid vaccine production and equitable distribution to sustain economic recovery.
“Vaccine policy is economic policy – and trade policy,” she said. The anticipated growth depended on a rapid availability of vaccines to all, and 6 billion doses have been produced, but distribution has not been even.
Belize’s 31 percent vaccination rate, and over 40 percent receiving at least one dose is well above the 2.2 percent vaccination rate at least one dose of a COVID-19 vaccine in low-income countries, which will cause their economic growth to lag behind. This disparity in access to vaccines could cause new, more dangerous strains of the virus to emerge, for which the vaccines may offer no protection. Already the Delta variant, which has shown itself to be 10 times more contagious than the first virus, has caused many countries to renew lockdown measures.
For those countries with a high rate of vaccinations, economic activity has resumed, supported by strong monetary and fiscal policy, which will lead to growth in Gross Domestic Product (GDP). The WTO has also upgraded its earlier prediction of 5.1 percent global GDP growth to 5.3 percent for this year, though it is expected to slow to 4.1 percent in 2022, adjusted from an earlier prediction of 3.8% percent. In the years 1990-2007, trade growth was double the growth in GDP, as has been seen this year, but the WTO projects that this ratio of trade-to-GDP growth will fall to almost one to one by next year. Some supply shortages have led to slight increases in inflation, but this will level out as governments shift monetary policy to become more sustainable.
Growth will be very uneven across the major regions, Asia’s merchandise imports are expected to grow 9.4 percent compared to 2019, and to exceed 2019 numbers by 14.2 percent by the end of 2022. North America’s imports are expected to grow by 11.9 percent by 2022, while South and Central America’s imports will grow 10.8 percent.
WTO second quarter numbers for the services trade won’t be out till later this month, but are expected to grow slightly. They were down by 9 percent for the first quarter, largely due to a 62 percent drop in travel. Other services such as financial and business services grew 6 percent over last year. WTO numbers indicate trade in services will trend lower than before the pandemic.