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Global Economy Forecast to Contract by 5.6% in 2020 Due to Pandemic

Global Economy Forecast to Contract by 5.6% in 2020 Due to Pandemic

Hermina Paull

Tuesday, December 15 2020, 11:57:00:AM

The coronavirus pandemic has plunged the global economy into the worst recession in over 80 years, with the social and economic impact continuing to mount amid surging Covid-19 cases around the world. As a result, the volume of global trade is expected to contract by the most since the 2009 global financial crisis, with the services sector experiencing the worst of the contraction.

According to the latest UN Conference for Trade and Development (UNCTAD) revised forecast, global trade is expected to decline by up to 5.6% in 2020, which is in the optimistic realm of the outlook considering the prior prediction of a 9% contraction. Nonetheless though, the previous decline of such a magnitude was recorded back in 2009 during the financial crisis, when global merchandise trade fell by a staggering 22%.


However, the UNCTAD downgraded the forecast for the service sector, which has been decimated amid the pandemic particularly due to a significant decline in tourism, travel, and transport activity. The battered sector is expected to fall to levels not seen since the 1990s, with a contraction of at least 15.4%. In comparison, the previous crisis saw the services trade decline by less than 10%.


In the meantime, numerous major economies are expected to face an unprecedented decline this year, given that the pandemic forced governments to impose lockdown and social distancing measures in order to contain the outbreak. China, which was one of the first countries to face the pandemic, is thus far the only major economy to experience a significant rebound, with demand for medical gear and electronics driving the country's exports to new highs.

Information for this briefing was found via the UNCTAD. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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