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World trade headed for rebound from Covid, says DP World study

[ January 19, 2021   //   ]

Global trade has not been as badly damaged by the Covid pandemic as was first feared and will recover faster than from the 2008 financial crisis, says a new study by port and logistics operator DP World.

Its inaugural ‘Trade in Transition’ report, Commissioned by DP World and conducted by the Economist Intelligence Unit, based on responses from 800 senior executives, says that while the World Trade organisation feared a 32% collapse in global trade eight months ago, in December 2020 it forecast a fall of 9.2%, “still a substantial drop…but far from the disaster once feared”.

The DP World survey, carried out in October and November, found that 77% of respondents believed their firms’ international sales would expand in 2020, with 13% indicating trade would increase by “50% or more” compared to 2019, and an additional 15% expecting trade to rise 30%-49%. Less than 10% of respondents expected a contraction in international trade.

It added: “Few, if any, respondents could have known at the time the scope and scale of the crisis the global economy would be soon confronting. Yet for many of them, the pandemic apparently hasn’t been so dire, at least insofar as cross-border sales are concerned.”

Over the course of the Global Financial Crisis, from when the value of merchandise trade began trending downward in August 2008,

While it took just over two years to fully recover from the 2008 financial crisis, 27% of respondents believe that recovery from the Covid crisis will take only 6-12 months, 2% less than six months and 43% 1-2 years. Only 8% believe that it will take more than five years and less than 2% believe trade will never recover.

However, the crisis may be a spur for change in global trading patterns. On average, firms in our survey are reallocating 32% of their revenue from the first half of 2020 to reconfigure their supply chains. a sentiment that “could indicate massive spend in the coming months and years on supply-chain shifts”.

The signing of Brexit deal in late December also removed the spectre of the UK crashing out of the EU which means that firms on both sides of the Channel can at least begin to make informed decisions about trade and investment.

Howsever, significant risks to trade remain. The residual effects of import tariffs and export controls imposed on essential goods during the pandemic are likely to continue to weigh on trust between countries, and tensions between the US and China will remain unresolved, particularly in the area of technology.

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