Global merchandise trade growth may not be sustainable, says WTO

 

The World Trade Organization (WTO) said the high rate of global merchandise trade growth (in volume) during the fourth quarter of 2020 is unlikely to sustain in the first half of 2021 since key indicators appear to have already peaked.

This may have repercussions on exports from India which have started recovering of late, say experts.

According to the latest Goods Trade Barometer of the WTO, the growth rate remained strong in the fourth quarter of 2020 after trade rebounded in the third quarter from a deep Covid-19-induced slump.

The barometer's current reading of 103.9 is above both the baseline value of 100 for the index and the previous reading of 100.7 in last November. This signals a marked improvement in merchandise trade since it dropped sharply in the first half of last year.

All component indices are either above trend or on trend, but some already show signs of deceleration while others could turn down in the near future, WTO said.

Furthermore, the indicator may not fully reflect resurgence of Covid-19 and the appearance of new variants of the disease, which will undoubtedly weigh on goods trade in the first quarter of 2021, according to the WTO.

The WTO said prospects for 2021 and beyond are increasingly uncertain due to the rising incidence of Covid-19 worldwide and the emergence of new variants.

Recovery will depend to a large extent on the effectiveness of vaccination efforts, it said. Devendra Pant, chief economist at India Ratings, said weakness in the global demand will have an impact on Indian exports.

Weak export performance last year will have some impact on growth in 2021. Absence of a strong global demand is one of the factors for weak growth performance of the economy in the past few years, he said.

Pant said it will be challenging for the Indian economy to sustain higher economic growth in the absence of a strong global demand.

Aditi Nayar, principal economist at ICRA, however, said she expected merchandise exports to strengthen as vaccine roll out gathers pace across nations.

Exports from India picked up in December 2020 and January 2021 after decline in most months of 2020 due to Covid and slowdown in global demand before that. Exports grew 6.16 per cent in January and a moderate 0.14 per cent in December.

 

www.business-standard.com dt. 23.02.2021