Impact of Covid-19 on Global & Domestic Trade

Impact on Global Trade
As we close of this unique and difficult year we look towards a better 2021. Even though Covid-19 cases have fallen from its peak in almost all nations, they still remain stubbornly high in many areas with some experiencing a resurgence. However with vaccines being finally rolled out in many countries, we can finally see some light at the end of the tunnel.
This period has demonstrated that global trade has been crucial in securing access to vital food, medical supplies, and the functioning of economies. The WTO now forecasts a 9.2% decline in the volume of world merchandise trade for 2020, followed by a 7.2% rise in 2021. After the Global Trade had a largely negative first half of the year in an almost global lockdown, trade volumes have recovered slightly in the second half. WTO now projects a less severe drop than the 12.9%, it projected in April. The forecast for 2021 is more pessimistic than the estimated 21.3% growth which will leave merchandise trade well below its pre-pandemic trend in 2021. The performance of trade exceeded expectations in few months due to a surge in June and July, as lockdowns were eased and economic activity accelerated. 
This trend of recovery has already shown effects of slow down, as the pent-up demand is being exhausted, businesses replenish their inventories for the time being, and the resurgence of COVID-19 in many parts of the world.
World Merchandise Trade Volume
Source: WTO
Lockdown and travel restrictions imposed significant supply side constraints on economies, drastically reducing output and employment in industries that are normally resistant to business cycle fluctuations. Still, strong and flexible monetary and fiscal policies by Governments, have boosted incomes, allowing relatively greater consumption once lockdowns were eased.
Impact on Indian Exporters
India’s exports fell 8.74% in November, steeper than 5.12% in October at $23.52 billion, dragged by petroleum goods, engineering, chemicals and gems and jewellery. In September, exports rose after six months of continuous decline, giving a temporary hope of a turnaround in outbound shipments. As such, trade deficit during the month stood at $9.96 billion, lower than the $11.75 billion recorded in October.

However, the decline in November was lower than 9.07% as shown by preliminary data released by the commerce and industry ministry earlier. India is still a net importer in November 2020, with a trade deficit of USD 9.96 billion, as compared to trade deficit of USD 12.75 billion, improvement by 21.93%. Exports to the United States, India’s largest export destination, continue to perform well but it hasn’t gained share of exports here. According to country-wise data available with the United States Census Bureau on imports into the country, China’s share rose to over three-fourths of total imports on a three-month moving average until September 2020.
Most other steps announced to improve India’s export performance may take time to show results. Schemes such as production-linked incentives could enhance India’s manufacturing capacities and drive exports over the medium term. On a more positive note, the arrival of the vaccine along with gradual lifting of lockdowns in India, has helped improved business sentiments. It remains to be seen how quickly the vaccine can be sourced and distributed for enough of the population, how effective the vaccine turns out in the long term and how these variables affect trade and economies in the future.
Looking to the Future
According to the WTO, global volumes of merchandise trade is set to rise by a 7.2% in 2021.Morgan Stanley projects strong global GDP growth of 6.4% for 2021—led first by emerging markets, followed by reopening economies in the U.S. and Europe—in a macro-outlook that diverges from the consensus.
Source: Morgan Stanley
India is expected to rebound to grow 7.9% in 2021 after recording a contraction of 9.9% this year and expand 4.8% in 2022 according to the Organization of Economic Co-operation and Development (OECD).
The monthly exports in India are expected to stand at 28.1 USD Million in 12 months’ time. In the long-term, monthly exports are projected to trend around 29.9USD Million in 2021 and 32.9 USD Million in 2022, according to ‘Trading Economics’. Some financial institutions, including Nomura, expect India to be the fastest growing Asian Economy in 2021. This could be further accelerated by companies diversifying their supply chain, and moving production bases which were primarily concentrated in China. India is touted as one of the favoured hot spots for new manufacturing bases, and Importers look to de-risk their supply chain.
To sustain themselves through this period and capitalize on the opportunities after, Exporters now need trade finance more than ever. Most exporters have already pledged collateral to the bank, with banks rejecting new limit requests more than before. This is where an unsecured trade finance facility from a company like Seawise Capital can help. We have continued to support our customers through this difficult year, and look forward to the next phase of recovery and growth together.
About us
Seawise Capital is a UK based trade finance company, offering factoring facilities to Indian Exporters. We have been operating in India since 2018, and are backed by large institutional US and UK based investors. With our own balance sheet capital, we fund the customers ourselves and have a quick funding process. We have customers all over the world, ranging from small to large scale exporters and we can tailor our solutions based on your requirements. With our fast and fully online process, you can get set up with a facility in less than a week.
One of the benefits of working with Seawise Capital over other providers is our flexibility. We understand the delicacy of the supplier/buyer relationship, and structure bespoke and cost-effective solutions that work for all the parties involved. We can cover buyers in over 150 different countries, and work with leading credit insurance providers and banking partners to make sure our clients get the best service.
Get in touch with us, to see how Seawise Capital could help you grow your exports.
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