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Author: Tomasz Brodzicki, Ph.D., Senior Economist II,
IHS Markit Maritime & Trade
Key Points
World merchandise trade volume is forecast to grow by
2.7% in 2020, accompanied by real GDP growth of 2.5%.
Trade volume growth should increase to 5.0% in 2021
with GDP growth at 2.7%.
The volume of global merchandise trade is forecasted to
reach 14.175 billion tons in 2020 and 14.881 billion tons in
2021.
The real value of global merchandise trade is predicted
to reach USD 18.870 trillion in 2020 and USD 19.795 trillion in
2021.
Trade tensions and overall trade policy uncertainty
pose the greatest risk to our forecasts, but the expected lessening
if implemented should provide some positive boosts.
Economic Growth and Trade Outlook
IHS Markit estimates show world real GDP growth slowing from
3.2% in 2018 to 2.6% in 2019 and 2.5% in 2020 and then picking up
slightly to 2.7% in 2021. The world growth rates in 2019 and 2020
for real GDP, trade volume and real value are below CAGR for the
period 2005 - 18 which is indicative of a global slowdown. The
stronger recovery is visible in forecasts for 2021.
World merchandise trade volume is forecasted to grow 2.7% in
2020, and to grow by 5.0% in 2021. Trade volumes increased only by
0.6% in 2018 and 0.3% in 2019 reaching 13.758 bn tons and 13.804 bn
tons respectively. Weaker trade performance in 2018 - 2019
reflected several factors: global trade tensions due to an increase
in protectionism, significantly weaker global economic growth and
higher levels of uncertainty in general.
Trade prospects for 2020 - 21
Despite sluggish global growth prospects, our models in Global Trade Atlas (GTA)
Forecasting point to an increase in the real value of global
trade both in 2020 and 2021 to respectively 18870.58 and 19794.77
USD billion. This translates into an increase of 38% in 2020 in
comparison to 2010. The growth rates in the real value of world
merchandise trade (year-on-year) are expected to be higher in 2020
in comparison to sluggish 2019. The forecasts for 2021 are even
more optimistic (the growth rate expected to exceed the CAGR for
2005-18).
The volume of world merchandise trade is forecasted to go up by
2.7% in 2020 and 5.0% in 2021 to respectively 14175.8 and 14881.3
billion metric tons thus increasing demand for transport services.
The growth rate in trade volume expected to exceed the CAGR for
2005-18 in 2021. The overall volume of world merchandise trade
shows a clear upward trend over the period 2005 - 21 with 2009 as
an exception followed by a quick recovery in the following years.
The volume of world merchandise trade is changing, however, quite
significantly by region. The following table shows the developments
in trade volume in more detail. We forecast the highest growth
rates in 2020 for South and North America - by 2.4 and 2.3%
respectively. The lowest for Africa - only 0.3%. The prospects are
much better for 2021 apart from Africa where the increase in trade
volume is likely to mimic that of 2020.
Qualitative factors
We must acknowledge several key factors that can affect our
global as well as regional forecast:
Lower growth prospects for the US and Canada (2020-2021 -
approx. 2%) and globally (2.54 in 2020 and 2.66 in 2021 according
to IHS Markit macro-models) will affect export-led economies in
particular;
High uncertainty in global trade policy due to US-initiated
protectionism and retaliatory actions by countries affected is
likely to continue;
The results of presidential elections in the US in November
2020 will be of key significance as they can potentially shift the
heading of the US policy; the recent impeachment creates an extra
dose of instability in the US political scene prior to the
elections, however, the procedure is almost sure to be terminated
by the Republican-dominated Senate;
US trade tensions with China (high US-imposed punitive tariffs
on Chinese exports and retaliatory actions by China) are likely to
persist under the Trump administration;
The trade war's impact will remain focused on China's exports
to the US, and the related component exports from the rest of Asia
to China (with few exceptions) - trade diversion is quite
likely;
The continuing trade conflict between the US and China can
structurally alter global VCs apart from the already present
precautionary shifts in global supply chains. At this stage appears
to be working in the favor of economies such as Taiwan, Vietnam,
and other parts of ASEAN-5 and some South American economies;
In the ongoing US-China trade negotiations China pledged to
spend between USD 40-50 billion on agricultural products annually
as part of a deal to end the trade war and thus to remove extra
tariffs imposed since last year on US farm products; If
successfully implemented this could ease the pressure in mutual
trade relations and positively affect global trade in 2020 - 21,
however, taking into account the course of tensions in trade since
the outset of the conflict in 2018 and the dynamics of bilateral
negotiations, the probability of the actual implementation of the
last results of negotiations should be considered rather low and
thus are unlikely to significantly affect the forecasts at least
for 2020;
Upon the recent parliamentary vote results in the UK, Brexit at
the end of January 2020 is on course; the no-agreement scenario is
still possible, however, as it could bring adverse consequences for
both the UK and EU the likelihood of that scenario is low (new
custom checks and increasing trade frictions despite eventual
agreement on a free-trade treaty);
The European Council (on 13 Dec 2020) reiterated its commitment
to an orderly withdrawal on the basis of the Existing Withdrawal
Agreement and called for its timely ratification and effective
implementation and reconfirmed its desire to establish as close as
possible a future relationship with the UK (customs union); The
trade negotiations are very likely to continue long post-Brexit
with some interim measures in place;
The paralysis of the multilateral dispute settlement system in
the WTO is probable to last.