IMPACT OF COVID-19 ON TRADE

The value of international trade in 2019 showed a slight decline to USD 18.1 trillion, 2% down from
its historic peak in 2018 of USD 18.5 trillion.

According to data just released by the US Census Bureau, U.S. imports from the rest of the world
stood at U.S. $178.3 billion (in non-seasonally adjusted terms) in February 2020, a 9.7 percent
decrease relative to the U.S. $196.4 billion recorded in the previous month. This was driven by a
stunning contraction in U.S. imports from China, from U.S. $33.3 billion in January 2020 to U.S.
$22.8 billion in February 2020.

The World Trade Organization (WTO) has projected global merchandise trade to
plummet between 13% and 32% in 2020 due to the covid-19 outbreak

DEMAND

The demand effect is most acute for sectors where consumers have effectively been banned from
making purchases – travel, sports, restaurants, highstreet retail, and so on. But a general decline in
demand is also being caused by the loss of income among those who have lost their jobs (perhaps
temporarily), the reduced wealth of consumers with stock market exposures and increased saving in
response to financial uncertainty. The exceptions are those sectors that the lockdowns directly benefit,
such as supermarkets and online entertainment.
SUPPLY

On the supply side, factory closures caused by staff sickness or governmental edicts are disrupting
supply chains and causing downstream shortages of retail goods and components for manufacturers.
The problem is exacerbated by the direct effects of the COVID-19 crisis on shipping. Port closures,
sickness among crew, and the prioritisation of medical supplies are resulting in a reduction in route
options, congestion at ports and long delays in the receipt of goods. Where possible, buyers will likely
seek to avoid these problems by finding domestic substitutes for imported final goods or components,
thereby reconstituting supply chains in the near future to build resilience into their business models

In the most likely recovery scenario (as per ICC’s report “global risks in trade finance” ) ,
International trade makes a slow return to normality from Q3 2020. Global trade falls by 21% in 2020
and does not return to its 2019 value until 2024, reaching USD 21 trillion in 2028.

TRADE FINANCE

BCG’s Trade Finance Model estimates that crossborder open account trade finance drives USD 21
billion of trade finance revenues today, representing 46% of the overall trade finance market, up from
42% five years ago. We expect this to grow at 2% CAGR over the coming decade, dependent on
macroeconomic factors, including industry recovery from COVID-19. Improved technology and
digitisation solutions, such as e-invoicing and automated reconciliations, have helped facilitate
substantial adoption of SCF by making it more operationally viable and thereby scalable

there may be the risk of a slowdown of SCF, in particular relative to traditional documentary trade
finance products which offer stronger risk mitigation in the era of COVID-19
GLOBAL GROWTH

Global growth is projected at –3.0 percent in 2020, an outcome far worse than during the 2009 global
financial crisis. Growth in the advanced economy group—where several economies are experiencing
widespread outbreaks and deploying containment measures—is projected at –6.1 percent in 2020.
Most economies in the group are forecast to contract this year, including the United States (–5.9
percent), Japan (–5.2 percent), the United Kingdom (–6.5 percent), Germany (–7.0 percent), France (–
7.2 percent), Italy (–9.1 percent), and Spain (–8.0 percent).

The group of emerging market and developing economies is projected to contract by –1.0 percent in
2020; excluding China, the growth rate for the group is expected to be –2.2 percent. Emerging Asia is
projected to be the only region with a positive growth rate in 2020 (1.0 percent), albeit more than 5
percentage points below its average in the previous decade. Latin America (–5.2 percent)— with
Brazil’s growth forecast at –5.3 percent and Mexico’s at –6.6 percent; emerging and developing
Europe (–5.2 percent)—with Russia’s economy projected to contract by –5.5 percent; the Middle East
and Central Asia (–2.8 percent)—with Saudi Arabia’s growth forecast at –2.3 percent, with non-oil
GDP contracting by 4 percent, and most economies, including Iran, expected to contract; and sub-
Saharan Africa (–1.6 percent)—with growth in Nigeria and South Africa expected at –3.4 percent and
–5.8 percent, respectively.

2021 RECOVERY

Global growth is expected to rebound to 5.8 percent in 2021, well above trend, reflecting the
normalization of economic activity from very low levels. The advanced economy group is forecast to
grow at 4.5 percent, while growth for the emerging market and developing economy group is forecast
at 6.6 percent.

INDIA

For India, the estimated trade impact to be most on chemical sector at 129 million dollars, textiles and
apparel at 64 million dollars, automotive sector at 34 million dollars, electrical machinery at 12
million dollars, leather products at 13 million dollars, ,metal and metal products at 13 million dollars
and wood products and furniture at 15 million dollars.(UNCTAD – CHECK ONCE)