International trade in goods and services is forecast to increase 9.5 percent in 2021 after declining by 5.6 percent last year, as lockdowns, quarantines and travel restrictions to deal with the pandemic had dramatic effects on trade, according to a new UN report.
“Still, the recovery has been extremely uneven, and scars will continue to weigh on the trade performance in the years ahead. Risks remain tilted to the downside,” said the United Nations Conference on Trade and Development’s (UNCTAD) Trade and Development Report 2021.
The report said the recent uptick in international trade may be “short-lived”, as it partly reflects an inventory restocking cycle in early 2021 after very low inventory-to-sales ratios were registered in many developed economies.
The UNCTAD said the pandemic-induced shift in consumption habits, notably the relative increase in demand for goods, is expected to shift back as demand patterns normalize in high-contact sectors.
“This dynamic could boost trade in services if the rollout of vaccines improves worldwide,” it said.
However, the spread of the Delta variant, including in the advanced economies with relatively high vaccination rates, as of mid-2021 is a “reminder of just how fragile and uncertain the current situation is”, the report said.
“The new variant could also prolong bottlenecks in international shipping caused by the pandemic, resulting in delays and price hikes in container shipping rates,” it added.
The UNCTAD said the evolution of trade flows since the emergence of coronavirus disease 2019 (Covid-19) has also diverged markedly from pre-pandemic patterns, as measured by their components.
“Overall, trade in goods has shown greater resilience than trade in services, though large disparities exist within these two broad categories,” it said.
Meanwhile, UNCTAD expects Southeast Asia, which includes the Philippines, to expand by 3.5 percent this year, and increase to 4.7 percent in 2022.
“A significant factor behind the expectation of a somewhat subdued recovery is the prospect of a relatively slow reversal of the numerous job losses suffered in 2020, many of which were low-skilled jobs in the services sector. As such, the bounce back in private consumption is expected to be gradual,” the report added.