East Asian economies drive global trade recovery

10 February 2021

The rebound in the fourth quarter of 2020 was uneven and largely powered by the trade of goods from and to developing countries.

Ho Chi Minh City, Viet Nam / © Mongkol Chuewong

Led by trade in goods, global trade recovered in the last quarter of 2020, reducing its overall decline for the year to about 9%, according to UNCTAD’s new Global Trade Update published on 10 February.

But while imports and exports of goods grew by about 8% in the fourth quarter of last year, trade in services stagnated as measures taken in the global fight against COVID-19 continued to affect sectors such as travel.

It’s worth noting that, globally, services represent two-thirds of economic output and more than half of the world’s jobs.

“The recovery process has been uneven, with many countries lagging,” said UNCTAD economist Alessandro Nicita, who worked on the report.


World trade in goods recovers in the second half of 2020

World trade in goods recovers in the second half of 2020, but trade in service lags
Source: UNCTAD calculations based on national statistics.
Notes: Quarterly growth is the quarter over quarter growth rate of seasonally adjusted values.
Yearly growth is the average growth rate of the last four quarters.
Figures for Q4 2020 are preliminary. Q1 2021 is a forecast.


Strong East Asian performance

The recovery of Q4 2020 was largely driven by the trade of goods from and to developing countries, especially by the very strong performance of East Asian economies.

On a year-over-year basis, trade in goods originating from East Asia grew about 12% in Q4 2020, with goods imports increasing by about 5%, the report says.

In contrast, negative trends remained for goods exports originating from most other regions, even in Q4 2020.

The influence of East Asian economies is even more marked when considering trade among developing countries (South-South trade).

While South-South trade has outperformed global trade, excluding trade of East Asian developing economies results in a significant drop in South-South trade, even for Q4 2020.


Change in global market share (selected economies)

China and East Asian economies gained market share during COVID
Source: UNCTAD calculations based on national statistics.
Notes: Estimates are based on changes between 2019 and 2020. The statistics for the groups are cumulative.


Positive growth in most sectors

“The recovery in Q4 2020 was more broad-based, as trade in most sectors recorded positive growth,” Mr. Nicita said.

In Q3 2020, the recovery was, by contrast, largely driven by sectors related to goods for which demand increased due to COVID-19, such as personal protective equipment and home office equipment.

However, besides services, trade in the energy and transport equipment sectors continued to be well below average levels.

Recovery expected to slow down this quarter

The report highlights persisting concerns about COVID-19, noting that uncertainty about the timing and magnitude of stimulus packages will result in a lower trade rebound in the coming months.

It projects that the first quarter of 2021 will record a slowdown in the recovery of trade in goods (a 1.5% drop relative to Q4 2020) and a further decline for trade in services (a 7% drop relative to Q4 2020), largely because of continued disruptions in the travel sector.

Export competitiveness during COVID-19

The report also finds that COVID-19 has affected countries’ competitiveness in global markets, with some economies gaining market share in certain sectors while losing it in others.

“The fall in global demand brought by COVID-19 has forced least competitive suppliers out of global markets, while enabling the most competitive suppliers to thrive during the recovery process,” the report says.

Countries such as China, Switzerland, Taiwan (province of China), Turkey, Uganda and Viet Nam experienced relatively better export performance in 2020, according to the report.

In contrast, Colombia, Nigeria, Saudi Arabia and Venezuela performed relatively worse last year.