WTO trade index hits a record low, signals that a global V-shaped recovery is unlikely

Sue Ogrocki/AP ImagesWorkers carry boxes at a Strategic National Stockpile warehouse in an undisclosed location in Oklahoma City on April 7, 2020.

A World Trade Organisation index tracking merchandise slumped to a record low in the second quarter, signalling that a V-shaped recovery is unlikely for global trade.

The WTO Goods Trade Barometer hit 84.5, the lowest on record since 2007, according to a Wednesday reading from the organisation. The record low print is down 15.5 points from the index baseline of 100, suggesting below-trend growth. It is also nearly 19 points lower on the year.

“The heavy economic toll of the COVID-19 pandemic suggests that the projections for a strong, V-shaped trade rebound in 2021 may prove overly optimistic,” the WTO wrote in the report. “As uncertainty remains elevated, in terms of economic and trade policy as well as how the medical crisis will evolve, an L-shaped recovery is a real prospect.”

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The full extent of the decline in global trade will be confirmed later this year when the WTO releases official data from April to June. Still, the latest reading is consistent with with WTO numbers released in June that forecast an 18.5% drop in merchandise trade in the second quarter of 2020.

Global trade began to decline in 2018 and fell into negative territory in 2019 amid the trade war between the US and China. When the coronavirus pandemic hit this year, it had a severe effect on global trade.

In April, WTO had forecast that global trade in goods could fall 13% to 32% in 2020 before rebounding between 21% and 24% in 2021. In June, the organisation updated its forecast, saying that swift government responses made the gloomy outlook less likely.

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