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TWN Info
Service on WTO and Trade Issues (May21/08) Geneva, 5 May (Kanaga Raja) – The UN Conference on Trade and Development (UNCTAD) on 4 May launched a new portal that provides an overview of the impact of the Covid-19 pandemic on trade and development. According to UNCTAD, the portal, which covers more than 25 indicators highlighting a broad selection of data as of 31 March 2021, is aimed at enhancing policymakers’ understanding of the wide-ranging impact of the pandemic and help them design suitable recovery policies. The portal is an update to UNCTAD’s report, titled “Impact of the COVID-19 pandemic on trade and development – Transitioning to a new normal,” that was released in November 2020. “As countries and the international community design recovery policies to help build resilient and more inclusive and sustainable economies, up-to-date analysis is critical,” said Ms Isabelle Durant, Acting Secretary-General of UNCTAD. “Mistakes from past crises, such as the 2008 financial crisis, must be avoided,” she added. According to the UNCTAD portal, more than one year on, the COVID-19 pandemic “continues to dominate our lives.” Despite the successful development of vaccines, the end of the pandemic is not yet in sight, said UNCTAD. The number of cases continues to increase in all regions, with daily infection rates reaching new records in April. “The roll-out of vaccinations has begun in many parts of the world, yet distribution and access vary greatly. This puts everyone at risk, as it allows for the virus to mutate and generate new variants,” it added. “Moreover, the uneven access will likely lead to stark differences in the ability of countries to recover from this crisis and, hence, to deepening inequalities.” According to the portal, the pandemic pushed the global economy into recession in 2020 on a scale not witnessed since the 1930s. To respond to this unprecedented crisis and avoid a prolonged period of depressed economic activity, Governments, particularly in advanced economies, adopted large fiscal support packages and central banks provided ample liquidity and lowered interest rates. The human and economic cost of the pandemic is still being felt, yet the support provided by Governments and the vaccination campaigns that are gathering pace have given rise to more encouraging forecasts for 2021, said UNCTAD. Global gross domestic product (GDP) growth is expected to attain almost 5 per cent in 2021, compared with predictions at the end of 2020 of GDP growth of around 4 per cent in 2021. However, in 2021, developed countries are expected to experience a relatively more significant rebound in GDP growth than developing countries, leading to concerns about a further expansion in the gap between rich and poor countries, particularly if this trend continues in 2022. “As the global economy emerges from the recession, the international community must be careful to avoid the mistakes made in the aftermath of the global financial crisis of 2008/09,” said UNCTAD. It is crucial to maintain an expansionary macroeconomic policy stance for as long as it takes the private sector to regain its confidence to spend, it added. According to UNCTAD, a large public investment push will be needed, with a variety of supportive policies used to complement expansionary measures, including job guarantees and public works programmes. “Measures such as increased financial flows and debt relief for developing countries should be considered, to assist them in achieving a more rapid recovery from the pandemic,” it said. COVID-19 CASES & VACCINATION ROLL-OUT According to the portal, as at 31 March 2021, the World Health Organization reported that almost 128 million people had contracted the coronavirus, of which 46 million cases (or 36 per cent) had been reported since the start of 2021. On the same day, nearly 2.8 million deaths were attributed to COVID-19, of which 1 million (or 36 per cent) had occurred in 2021. Globally, the apparent mortality rate is 2.2 per cent and the data suggest that the world is currently in the grip of a third wave. The first wave peaked in mid-August 2020 (with almost 1.9 million cases in one week), the second wave, in early January 2021 (with over 5 million cases in one week) and the third and current wave began in the second half of February 2021, with no indications yet that it has peaked. In the last week of March, only seven weeks into the third wave, more than 4.1 million new cases were recorded in one week. As at end-March 2021, the Americas accounted for 44 per cent of cumulative cases (almost 56 million) and 48 per cent of deaths (1.3 million); Europe, for 35 per cent of cases (almost 45 million) and deaths (almost 1 million); South-East Asia, for 12 per cent of cases (almost 15 million) and 8 per cent of deaths (220,000), with the lowest apparent mortality rate among the regions, while Africa has recorded the highest mortality rate. Wave patterns differ markedly across the regions. The Americas, Europe and the Eastern Mediterranean currently appear to be in the middle of a third wave, said UNCTAD. “Africa has experienced two distinct waves and there are indications of increasing numbers of cases, which may signify the start of a third wave, beginning at a much higher level of daily infection rates.” South-East Asia appears to be recovering from a second and relatively short-lived wave. The Western Pacific is an outlier in that it appears to be recovering from a fourth wave. UNCTAD said a general pattern across all regions is that the recovery from each wave is only partial, meaning that each subsequent wave starts at a higher level of daily infection rates than the previous wave. In every region, the underlying trend is of increasing rates of infection. According to the portal, as at 31 March 2021, 806 million people had received at least one dose of a COVID-19 vaccine. In absolute terms, Asia has administered the most vaccines (369 million) but this accounts for only 2.1 per cent of the regional population. In terms of population share, North America has the highest rate of vaccination (18.8 per cent), followed by Europe (12.7 per cent), and Africa has the lowest share, with 14 million people (0.6 per cent) vaccinated. Disparities at the national level are pronounced, said UNCTAD, pointing out that as at end-March 2021, Bhutan and Israel had the highest vaccination rates, at 51.6 and 60.1 per cent, respectively. Other countries with relatively high rates included the United Kingdom of Great Britain and Northern Ireland (45.9 per cent), Bahrain (30 per cent), the United States of America (29.2 per cent), Uruguay (17.9 per cent) and Morocco (11.7 per cent). The Russian Federation, a producer and exporter of a COVID-19 vaccine, has vaccinated 4.8 per cent of the population. Australia and New Zealand, which have pursued a closed border or zero-COVID strategy, had vaccination rates of 0.6 and 1.1 per cent, respectively (the latest reported data for Australia is as at 13 March), said UNCTAD. HUMAN DEVELOPMENT AND POVERTY According to the portal, the COVID-19 pandemic had negative consequences for human development in 2020. In 2020, for the first time since the United Nations Development Programme launched the Human Development Report in 1990, the human development index declined, with some of the gains achieved over the past three decades having been eroded. More than 2.7 million people have died from health problems associated with COVID-19 and the quality of education has deteriorated due to school closures and mitigation measures introduced to curb the spread of the virus. Furthermore, as a result of the pandemic, the world has experienced the largest contraction of global output since the Great Depression. “These developments have resulted in a narrowing of individual capabilities and exacerbated the challenges to human development created by technological progress, climate change and inequality in resources and opportunities,” said UNCTAD. A notable consequence of the pandemic is the significant challenge it presents to global efforts to eradicate poverty, it added. New estimates of the impacts on global poverty, based on January 2021 growth forecasts, indicate that 119-124 million people were pushed into extreme poverty in 2020. In the baseline scenario, global extreme poverty increased by 119 million and in the less optimistic or downside scenario, which assumes a greater contraction of growth, it increased by 124 million. Changes in poverty levels associated with the pandemic arise from two sources, namely, those who were pushed into poverty because of the pandemic (88 million in the baseline scenario and 93 million in the downside scenario) and the poor who would have transited out of poverty in the absence of the pandemic (31 million). About 60 per cent of the additional poor globally are estimated to be in South Asia. In 2021, it is estimated that 143-163 million people will be pushed into extreme poverty. “These estimates are worrisome as it is the first time in the past two decades that there has been a significant increase in global extreme poverty, representing a major setback for efforts to eliminate extreme poverty and achieve the Sustainable Development Goals,” said UNCTAD. ODA AND DEBT According to the portal, contrary to expectations and despite contractions in GDP, total official development assistance (ODA) provided by the States members of the Development Assistance Committee is estimated to have risen to $161.2 billion in 2020, or its highest level to date. This marked a 3.5 per cent increase in real terms over the level in 2019. Preliminary estimates suggest that in 2020, $11.9 billion of ODA disbursements was dedicated to pandemic-related activities, of which $3.27 billion was directed to the health sector and $554 million was delivered in the form of debt relief grants to developing countries, said UNCTAD. However, total ODA figures pale in comparison to combined global stimulus packages that amounted to $16 trillion; ODA represents only 1 per cent of the total resources mobilized to respond to the pandemic, it added. ODA is the most stable source of financing for many developing countries and, while an increase was welcome, it was not sufficient to offset the significant contractions in other resource flows, namely, remittances, foreign direct investment (FDI), private capital flows and trade, said UNCTAD. In this context, the recent announcement to reallocate $650 billion in special drawing rights to help provide liquidity to developing countries is welcome, it added. It noted that in an effort to assist developing countries to respond to the crisis, the Group of 20 established the debt service suspension initiative (DSSI) to provide short-term debt relief to enable the poorest countries to concentrate their limited resources on responding to economic, social and health-related needs associated with the pandemic. Since it took effect in May 2020, DSSI has delivered more than $5 billion in short-term debt relief to 47 of the 73 eligible countries. DSSI has been extended to the end of 2021 and has provided much needed breathing room, yet it is important to note that it offers only a temporary suspension of debt servicing obligations and does not constitute a decrease in the debt owed, said UNCTAD. “Among eligible countries, 45 per cent are either in debt distress or at a high risk of debt distress, indicating that more significant measures will need to be taken beyond DSSI to resolve their debt difficulties.” Unfortunately, the eligibility criteria have not been expanded to include additional countries that also have growing levels of debt distress, it added. INVESTMENT AND TRADE According to the portal, the pandemic has hit international investment flows hard, although the impact has varied across regions and country groups. In 2020, global FDI fell by 42 per cent, reaching an estimated total of $859 billion. FDI in Europe and North America fell sharply, while FDI in developing Asia dropped by only 4 per cent. As a result, developing economies received 72 per cent of total FDI. The pandemic has affected all types of investment, namely, greenfield projects (-35 per cent), cross-border mergers and acquisitions (-10 per cent) and international project finance (-2 per cent), said UNCTAD. According to the portal, after steep declines in the first half of 2020, global merchandise and services trade bounced back in the third quarter of 2020. The data indicate a continuation of this trend in the fourth quarter of 2020 and the first quarter of 2021 but the recovery in services continues to lag behind that of merchandise trade, it added. In the first quarter of 2021, on a year-on-year basis, merchandise trade is expected to have grown by 25 per cent (or 8 per cent in terms of volume), yet services trade is expected to have contracted by 8 per cent. The negative state of services is largely driven by the steep fall in and continued sluggish demand for tourism and travel services, said UNCTAD. “The use of trade policy instruments, both tariff and non-tariff, was a common response to the pandemic,” said UNCTAD, adding that many of these measures had a trade-restrictive effect. “While most of the measures were designed to be temporary, they nevertheless disrupted supply chains and created uncertainty.” Both developed and developing countries used these restrictive measures. Many countries ultimately decided to be cautious about or completely withdraw such measures. For example, the Group of 20 stated that emergency measures must be “targeted, proportionate, transparent and temporary [and] not create unnecessary barriers to trade or disruption to global supply chains”. Similarly, the Heads of Government of the 54 member States of the Commonwealth pledged to lift emergency measures as soon as possible. According to UNCTAD, the figure shows that nearly 40 per cent of the measures that had a trade-restricting effect have since been terminated. Several countries used measures to facilitate trade in medical goods and foodstuffs, enabling easier imports. Many of these involved the elimination of tariffs by developing countries, said UNCTAD. “There is concern that such patterns will be repeated with regard to the roll-out of vaccinations and related inputs, yet most measures introduced to date with regard to vaccines are of a trade-facilitating nature and only one is a restriction on exports,” it added. UNCTAD said experience has shown that such restrictions could derail vaccine production and distribution efforts. “Trade-related responses to the pandemic have reinforced the need for more coordinated arrangements in future in order that the market-related disruptions that often result from such measures may be minimized.” COMMODITY PRICES According to the portal, commodity prices declined at the start of the pandemic in early 2020, with the index of all commodity groups dropping from 115.51 in December 2019 to 73.47 in April 2020. This 36 per cent decline in only four months was the result of responses to the pandemic, particularly confinement measures, said UNCTAD. Apart from minerals, ores and metals, all commodity categories experienced a drastic drop in prices. Fuels recorded the most dramatic decline, falling from 115.65 in December 2019 to 49.08 in April 2020, a drop of 58 per cent. “Thereafter, as it became clear that the pandemic would extend into the longer term, countries began to adapt response measures,” said UNCTAD. The reopening of economies, particularly in China, the world’s greatest importer of primary commodities, resulted in increasing demand and, therefore, higher prices. By December 2020, most commodity prices had recovered from their lows in April 2020. The price rally continued into 2021, with the index of all commodity groups reaching 131.85 in February 2021, or 14 per cent higher than the pre-pandemic level. In February 2021, the food price index was 114.85, or 10 per cent higher than in December 2019 and 17 per cent higher than the low in April 2020. In December 2019-February 2021, the index of minerals, ores and metals increased steadily, gaining 35 per cent of its pre-pandemic value. Similarly, the index of fuels recovered from its low in April 2020, reaching a value of 122.16 in February 2021. The price declines in December 2019-April 2020 may be primarily explained by the pandemic yet the factors behind what occurred subsequently are more complex, said UNCTAD. The pandemic has continued and most related measures remain in place in many countries, yet commodity prices continue to increase, it added. Two main factors may explain the current state of commodity markets, said UNCTAD. First, the early recovery of the economy in China, given its position as the greatest importer of commodities. “The new focus in China on high-end manufacturing to build domestic capacity in technology and innovation may, for example, help explain the rally of prices for minerals, ores and metals.” Second, the current economic environment, with a weak United States dollar, near-zero interest rates and increasing demand for commodities associated with the “green” transition (cobalt, lithium, aluminium, nickel, manganese and graphite, among others). Some analysts suggest that the world may be on the cusp of a new commodity super-cycle, said UNCTAD. However, the period under consideration is too short to confirm this, given that previously observed comparable price movements did not necessarily lead to a super-cycle, it added. MANUFACTURING According to the portal, after a significant decline in the first half of 2020, global manufacturing output showed signs of recovery in the second half of the year. Following a significant drop of 11.2 per cent in the second quarter due to pandemic-related confinement measures, output grew by 2.4 per cent year-on-year in the fourth quarter of 2020. According to UNCTAD, the early recovery has been uneven, in terms of both industries and country groupings. For example, some industries have reported moderate growth across all country groupings, such as computer, electronic and optical products; rubber and plastic products; and chemicals and chemical products. In contrast, fabricated metal products, basic pharmaceutical products and other industries have experienced declines in industrialized countries. Year-on-year in the fourth quarter of 2020, there were considerable reductions in nearly all country groupings in textiles, wearing apparel and coke and refined petroleum products. Overall, the recovery to date has been more pronounced in developing economies, led by China, than in developed economies, said UNCTAD. The portal also provided detailed data in other areas such as tourism, small and medium sized enterprises, transport and greenhouse gas emissions. (The UNCTAD portal can be accessed at: https://unctad.org/programme/covid-19-response/impact-on-trade-and-development-2021#aTrade)
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