Global economy to contract by 5.6% this year due to pandemic – UN

The volume of global trade is set face the sharpest decline since the end of the global financial crisis, falling as much as 5.6 percent this year, the UN Conference for Trade and Development (UNCTAD) predicts.

The figure, announced by the agency earlier this week, is more optimistic than its previous forecast, which expected global trade to contract by nine percent year-on-year. The previous largest decline was seen in 2009, when global merchandise trade took a 22-percent nosedive.

However, the UNCTAD downgraded its forecast for the service sector, which was hit hard by a steep decline in travel, transport and tourism activity during the pandemic. The troubled sector is on path to fall by a staggering 15.4 percent to levels last seen in the 1990s, according to nowcasts – data-led projections for the immediate future – from UNCTAD's 2020 Handbook of Statistics. Even following the previous crisis, services trade was down by less than 10 percent.  

The pandemic has also transformed business as usual in 2020, the UN agency said, adding that it had to adjust statistics methods to provide up-to-date figures on the economic fallout.

“Unlike previous years however, the models that nowcast international trade and GDP had to grapple with some of the most unusual circumstances in living memory,” said UNCTAD’s chief statistician, Steve MacFeely. 

Most major economies are set to face contraction this year after the Covid-19 outbreak forced governments to impose restrictions to contain the spread of the deadly virus. China, which was the first to face the outbreak and bring it under control after strict lockdowns, can become the only exemption. The world’s second-largest economy has already started to rebound and its trade is booming, with strong demand for electronics and medical gear driving its exports to new highs.

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