The Covid-19 global epidemic which has devastated countries continues to upend the global economy, with the latest outlook painting a grim picture on world trade in the first quarter of this year.

The World Trade Organisation’s (WTO) latest trade barometer indicates that the volume of merchandise trade shrank by 3 per cent year‑on‑year in the first quarter of 2020.

Initial estimates for the second quarter, when the virus and associated lockdown measures affected a large share of the global population, indicate a year‑on‑year drop of around 18.5 per cent.

The WTO's April annual trade forecast had set out a relatively optimistic scenario in which the volume of world merchandise trade in 2020 would contract by 13 per cent, and a pessimistic scenario in which trade would fall by 32 per cent.

The international trade organisation says that trade would only need to grow by 2.5 per cent per quarter for the remainder of the year to meet the optimistic projection.

Global commercial flights, which carry a substantial amount of international air cargo, were down nearly three quarters (‑74 per cent) between January 5 and April 18, and have since risen 58 per cent through mid-June.

Container port through also appears to have staged a partial recovery in June compared to May, while indices of new export orders from purchasing managers’ indices also started to recover in May after record drops in April.

According to China’s customs statistics, the country’s exports of automatic data processing machines, including computers, were up 30 per cent year-on-year in US dollar terms in April.

Anecdotal evidence similarly points to strong demand for computer and information technology services, which have facilitated working from home during the crisis.

Automobile sales have also rebounded from recent, though admittedly extreme, lows. For example, sales of cars in China were up 5 per cent year‑on‑year in May after falling 79 per cent in February.

Car sales in Western Europe and the United States were still down sharply in May compared to last year, but declines were smaller than in the previous month.

Economists say increased purchases of consumer durables could be seen as a bellwether signaling renewed consumer confidence as lockdowns are lifted and economies start to revive.

Rwanda

The outlook reflects the situation in Rwanda where key trade indicators were down in the first quarter of this year.

Almost all export categories showed a decline of 23.7 per cent due to the drop in international commodity prices, according to the National Institute of Statistics of Rwanda (NISR).

The value of coffee exported decreased by -49.2 per cent, while the value of Coltan and Cassiterite dropped by 37.8 per cent. Only tea revenues registered an increase of 22.9 per cent.

The drop in international commodity prices saw the price of coffee decline by -8.1 per cent, Coltan by -5.5 per cent and Cassiterite by -9.5 per cent.

Travel receipts (revenue from foreign visitors coming to Rwanda) dropped by 35 per cent in the first quarter of 2020 compared to the same period last year.

Forecasts show revenues from minerals, tea, and coffee are projected to reduce by 19 per cent in 2020, both from the drop in commodity prices and reduction in export volumes and services, tourism flows due to travel restrictions, and reduction in remittances will weigh heavily on the external sector.

Revenues from travel and air transport are projected to be lower by 70 per cent and foreign direct investment (FDI), a key element of Rwanda’s economic growth, will be lower by 62 per cent.

Imports of goods will be lower by 7 per cent in 2020 due to disruptions of global trade and lower oil prices.

Looking ahead

Adverse developments, including a second wave of Covid‑19 outbreaks, weaker than expected economic growth, or widespread recourse to trade restrictions, could see trade expansion fall short of earlier projections in 2021.

Director‑General Roberto Azevêdo, said the fall in trade seen today is historically large. 

"In fact, it would be the steepest on record. But there is an important silver lining here: it could have been much worse,” he said. 

"This is genuinely positive news but we cannot afford to be complacent,” he added.

Policy decisions have been critical in softening the ongoing blow to output and trade, and they will continue to play an important role in determining the pace of economic recovery.

For output and trade to rebound strongly in 2021, fiscal, monetary, and trade policies will all need to keep pulling in the same direction, according to WTO economists.