World trade in services in the third quarter of 2020 fell 24% compared to the same period in 2019, reported the World Trade Organization (WTO).
This represents only a small rebound from the 30% year-on-year decline recorded in the second quarter, in stark contrast to the much stronger rebound in trade in goods.
Preliminary data further suggests that, in November, world services trade was still 16% below 2019 levels.
Prospects for recovery remain bleak, as a second wave of Covid-19 infections required new stricter lockdown measures in many countries, with stricter restrictions on travel and related services extending through the first quarter of 2021.
The latest statistics confirm earlier expectations that global trade in services would be more affected by the pandemic than trade in goods, which was only down 5% year-on-year in the third quarter. Expenditures sacrificed on tradable services could be directed elsewhere, and consumers would switch to goods.
Unlike goods, services cannot be stored, which means that despite pent-up demand, many of the revenue losses from canceled flights, vacations abroad, restaurant meals, and cultural/recreational activities are likely to be permanent.
Travel continues to be the most affected service sector, 68% less globally compared to the same period in 2019.
In the third quarter of 2020, international traveler spending decreased 88% in Latin America and the Caribbean, 80% in both Asia and Africa, 78% in North America and 55% in Europe.
The relaxation of travel restrictions in Europe during the summer months produced only a modest rebound in world trade in services in the third quarter.
Trade in “Other services”, such as construction, recreational, legal and financial services, repeated its uneven performance: most subsectors contracted, with a notable exception of computer services.
With construction projects delayed or postponed in many countries due to the pandemic, global construction exports fell 16% year-on-year as several Asian exporters saw sharp falls.
Audiovisual, arts and recreational services also experienced double-digit declines (-14%), with US exports falling 24% and those of the United Kingdom almost in half (-45%).
Legal, management, accounting and advertising services saw a tepid 1 percent year-on-year rebound.
Financial services increased 2% globally, with exporters from different regions registering positive growth. This includes the European Union, whose exports of financial services increased 4% year-on-year.
IT services continued to be the most dynamic sector in the third quarter, increasing 9% due to growing global demand for cloud computing, platforms and virtual workplaces.