Trade and Recovery: A two-act scenario

According to Horizon-Group’s insights, world trade in goods is set to plummet in 2020, with the drop estimated by the WTO at 18.5% compared to 2019. Countries less reliant on global trade were less exposed to the immediate effects of the global contraction.

Inversely, as trade levels are restored, countries more open to trade are likely to recover faster, as they can benefit from their trading partners’ recovery. Given that the virus spread to countries over a period of months, and that the economic impact differs for each country, each economy’s recovery will largely depend on the timing and the pace of recovery in their main export markets.

Countries that have traditionally exported to markets where the CERI shows strong recovery capacity are likely to experience more positive feedback loops through their trade linkages. The figure above shows this for selected countries. Based on this data, Brazil’s recovery is likely to be less driven by trade than China’s, because over half of Brazil’s exports are to countries with limited recovery capacity, where it will take longer for demand to pick up.

The crisis may provide an opportunity to step up efforts and channel some of the stimulus package to help companies diversify export markets and thus strengthen future resilience.

Source: Covid Index | COVID Economic Recovery Index | Switzerland (covidrecoveryindex.org)