By BERNIE CAHILES-MAGKILAT
World merchandise trade growth is likely to remain weak in early 2020, according to the WTO Goods Trade Barometer.
Released on February 17, the real-time measure of trade trends now reads 95.5 — less than the 96.6 recorded last November and well below the index’s baseline value of 100. This below-trend performance could be reduced further by a new global health threat.
Goods barometer signals further weakening of trade in first quarter of 2020
The Goods Trade Barometer provides information on the current trajectory of world merchandise trade relative to recent trends, based on best-available forward-looking data. It does not account for recent developments such as the outbreak of COVID-19, the new coronavirus disease, which may dampen trade prospects further.
WTO trade statistics show that the volume of world merchandise trade was down 0.2% in the third quarter of 2019 compared to the previous year. While the year-on-year growth figures for the fourth quarter may pick up slightly, the latest barometer reading provides no indication of a sustained recovery.
Indeed, year-on-year trade growth may fall again in the first quarter of 2020, though official statistics to confirm this will only become available in June.
The drop in the barometer since November has been driven by additional declines in indices for container shipping (94.8) and agricultural raw materials (90.9), as well as the plateauing of the automotive products index (100.0). Although indices for export orders (98.5), air freight (94.6) and electronic components (92.8) are all below baseline, they appear to have stabilized and would normally be expected to rise in the coming months. However, every component of the
Goods Trade Barometer will be influenced by the economic impact of COVID-19 and the effectiveness of efforts to treat and contain the disease.
Like its counterpart for services, the Goods Trade Barometer aims to gauge momentum and identify turning points in global trade growth. As such, it complements trade statistics and forecasts from the WTO and other organizations. Readings of 100 indicate growth in line with medium-term trends; readings greater than 100 suggest above-trend growth, while those below 100 indicate below-trend growth.
Meantime, the Asia Pacific Economic Cooperation said that experience has shown that health outbreaks such as the recently named COVID-19 by the World Health Organization (WHO) will weigh down economic growth, at least in the near-term. Its effects further on are yet to be determined.
APEC, however, said that the grouping, a collective of 21 economies lining the Pacific which primarily engage each other on economic matters, produced a SARS action plan, to support efforts to deal with the outbreak.
“Lessons learnt from that experience led to the establishment of the Health Task Force to help address health-related threats to economies’ trade and security, focusing mainly on emerging infectious diseases,” APEC said in a statement.
In 2007, APEC established the Health Working Group (HWG) to have a collective regional preparedness and response to the emergence of health outbreaks, knowing that the impact of SARS, avian influenza, H1N1 and the like falls not only on the health sector but also agriculture, trade, tourism, transportation and business across many borders. The same group met twice this month in Putrajaya, Malaysia, to address COVID-19. It was an opportunity for APEC officials to coordinate with the WHO, which sent representatives, and with key infectious disease experts.
It is easy to draw parallels between SARS and this new strain. But it is still early to quantify the impact of the coronavirus’s spread on global economic growth. The world today is a different arena. China accounts for 21.4 percent of world GDP (in PPP terms, as of end-2018) compared to around 4.5 percent during the SARS outbreak.
The increased interconnectedness of the global economy and the deep integration of international supply chains amplify the impact of the current health shock to an already-fragile global economic recovery. Looking ahead, a deterioration in consumer and investor sentiments could translate into significant economic and financial risks.