Impact of the COVID-19 pandemic
on trade and development
Situation as at 31 March 2021
Introduction
More than one year on, the coronavirus disease of 2019 (COVID-19) pandemic continues to dominate our lives. Despite the successful development of vaccines, the end of the pandemic is not yet in sight. 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. 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.
As countries and the international community design recovery policies to help build resilient and more inclusive and sustainable economies, up-to-date data are critical. This website aims to contribute to this endeavour. It provides a broad selection of data on the impact of the COVID-19 pandemic on trade and development, reflecting the situation as at 31 March 2021. The information serves as an updated supplement to the publication Impact of the COVID-19 Pandemic on Trade and Development: Transitioning to a New Normal, issued in November 2020. Previous indicators are complemented by new data where relevant and available, notably, data on the roll-out of vaccinations.1 Key messages are highlighted to provide an overview.
Contrary to expectations, in 2020, total ODA provided through the Development Assistance Committee rose to its highest level to date, yet this increase did not compensate for the magnitude of contractions in other resource flows.
DSSI has delivered more than $5 billion in debt relief to more than 40 eligible countries but not all eligible countries have participated in the initiative and many are in debt distress or at a high risk of debt distress.
In 2020, FDI fell by 42 per cent, with Europe and North America recording the steepest declines. This decline, especially in Goals-relevant sectors, is of particular concern in developing countries, including the least developed countries.
After steep declines in the first half of 2020, global merchandise and services trade bounced back in the third quarter of 2020, and this trend continues. Services, however, continue to lag behind, due to the impacts on the tourism and travel industry.
Trade policy instruments were frequently used to restrict exports and facilitate the imports of essential goods. However, given the negative repercussions on supply chains, States have terminated nearly 40 per cent of trade-restricting measures.
Tourism has taken a heavy toll, with losses in the industry at 11 times the losses experienced during the global financial crisis of 2008/09.
Container ship port calls are in many regions back to pre-pandemic numbers or higher. Demand for commercial air traffic continues to be depressed.
Global manufacturing output showed signs of recovery in the second half of 2020 but is uneven across industries and country groupings.
In February 2021, the index of all commodity groups was 14 per cent higher than the level directly before the pandemic. The recovery of the economy in China and its strong demand for imports is the key driver of price increases.
Contrary to during the first months of the pandemic, the stock prices of most leading technology companies no longer outpace broad market indices, indicating that the growth of online activities may have been priced in.
The pandemic has led to the greatest reduction in carbon dioxide emissions since the Second World War II (-5.8 per cent in 2020) but this is not enough to meet the targets in the Paris Agreement.
COVID-19 cases, deaths and vaccines
COVID-19 cases and deaths
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. Africa has recorded the highest mortality rate. The apparent rate is greatly affected by testing regimes, the number of cases recorded and the number of deaths attributed to COVID-19.
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. 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.
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.
Vaccination roll-out
Economic growth
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. 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. 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. 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.
Unemployment
Loss of jobs
According to ILO (2021), in 2020, 8.8 per cent of global working hours were lost relative to the fourth quarter of 2019, equivalent to 255 million full-time jobs. This translates into a loss of $3.7 trillion or 4.4 per cent of global GDP in 2019. To put this into context, during the global financial crisis of 2008/09, the loss of global working hours was only 0.6 hours. The impact of the pandemic on global working hours has therefore been approximately four times greater than that of the financial crisis. 3
The greatest loss was experienced in the second quarter of 2020, as businesses and households adapted to the first round of confinement measures. About 33 million hours, or 13 per cent of the total hours lost, were lost to outright unemployment. An additional 81 million hours were lost due to shifts to inactivity or underemployment. Consequently, the global labour force participation rate dropped by 2.2 per cent. By contrast, in 2008–2009, global labour market participation fell by only 0.2 per cent.
Irrespective of region or income group, women have been affected by employment losses to a greater extent than men. At the global level, employment losses for women were at 5 per cent in 2020, compared with 3.9 per cent for men. Furthermore, women were more likely than men to become economically inactive and drop out of the labour force. Young workers were particularly affected by the pandemic, with an employment loss of 8.7 per cent in 2020, compared with 3.7 per cent for adults.
Looking ahead, ILO expects to see a recovery in the second half of 2021 yet notes that much uncertainty remains. The speed and depth of the recovery will depend on a wide range of political, economic and health-related factors, including vaccination rates, confinement measures and whether policy measures can be maintained to promote economic and labour market recovery. Given this uncertainty, employment losses in 2021 are expected to be between an optimistic forecast of 36 million hours and a less optimistic forecast of 130 million hours.
Unemployment through a gender lens
Human development and poverty
Human development index
Poverty
Official development assistance and debt
Official development assistance
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. 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. 5
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. In this context, the recent announcement to reallocate $650 billion in special drawing rights to help provide liquidity to developing countries is welcome.
Debt
Investment
Foreign direct investment
International investment in Goals-relevant sectors
Trade
Trade nowcast
Trade policy
The use of trade policy instruments, both tariff and non-tariff, was a common response to the pandemic. 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”. 6 Similarly, the Heads of Government of the 54 member States of the Commonwealth pledged to lift emergency measures as soon as possible. 7 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.
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. 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.
Tourism
Transport
Shipping: Port calls and container freight
Commercial flights
Manufacturing
Commodity prices and selected stock prices
Commodity prices
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. 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. 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. The pandemic has continued and most related measures remain in place in many countries, yet commodity prices continue to increase. Two main factors may explain the current state of commodity markets. 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 supercycle. 10 The period under consideration is too short to confirm this, however, given that previously observed comparable price movements did not necessarily lead to a supercycle.
Stock prices of technology companies
The pandemic has accelerated the expansion of electronic commerce and other online and digital services. This has been reflected in the sharply rising stock prices of leading technology companies, which have outperformed broad market indices.
However, in October 2020–end-March 2021, another pattern occurred. The growth of the stock prices of most of these companies had mostly stayed below the value of Standard and Poor’s 500 index, showing relatively moderate growth or a decline. During this period, the index increased by about 17 per cent, while the stock prices of Apple, Facebook, Microsoft and Tencent increased by 4–16 per cent and those of Alibaba and Amazon declined by 21 and 4 per cent, respectively. Of selected companies, only Google outperformed the index, with an increase of almost 40 per cent. This suggests that the general benefits from increased online activity may have been priced in and that company-specific circumstances are once more becoming important in the price development of individual stocks. This is illustrated by the fluctuations in the stock prices of Alibaba and Tencent, which have been affected by recent initiatives by the Government of China to amend the competition law and introduce new regulation to curb the monopoly of large technology companies.
Small and medium-sized enterprises
Greenhouse gas emissions
References
1. Notes: The term “dollars” ($) refers to United States dollars. All websites referred to were accessed in April 2021.↑
2. See https://ourworldindata.org/covid-vaccinations.↑
3. See https://unstats.un.org/unsd/ccsa.↑
4. See https://blogs.worldbank.org/opendata/updated-estimates-impact-covid-19-global-poverty-looking-back-2020-and-outlook-2021.↑
5. See https://www.oecd.org/newsroom/covid-19-spending-helped-to-lift-foreign-aid-to-an-all-time-high-in-2020-but-more-effort-needed.htm.↑
6. See https://g20-tirn.org/wp-content/uploads/2020/11/B-Hoekman.pdf.↑
7. See https://thecommonwealth.org/media/news/commonwealth-issues-joint-statement-covid-19-pandemic.↑
8. See https://www.icao.int/Newsroom/Pages/2020-passenger-totals-drop-60-percent-as-COVID19-assault-on-international-mobility-continues.aspx. ↑
9. See https://unstats.un.org/unsd/ccsa.↑
10. See https://www.institutionalinvestor.com/article/b1r0r28fl471c5/are-we-witnessing-the-start-of-a-new-commodities-supercycle.↑
11. See https://www.iea.org/articles/global-energy-review-co2-emissions-in-2020.↑
12. See https://unfccc.int/news/cut-global-emissions-by-76-percent-every-year-for-next-decade-to-meet-15degc-paris-target-un-report.↑
