World trade in services would fall dramatically in 2Q20: WTO
World trade in services will fall dramatically in the second quarter of 2020, according to the World Trade Organization (WTO) Trade in Services Barometer.
However, resilience in some service sectors will offset precipitous declines in others, particularly air travel.
Although the latest reading of 95.6 is the weakest on record and well below the 100 benchmark, it still outperforms recent trends in real service trade activity, suggesting strong fundamentals and pointing to a possible early recovery.
The WTO Services Trade Activity Index provides a rough measure of the volume of world trade in services.
The index posted a 4.3% year-on-year decline in the first quarter of 2020 after two consecutive quarters of weak growth.
This reflects a slowdown in the pace of global economic activity, as well as the early stages of the Covid-19 pandemic. The WTO expects the index to remain below trend for at least the second quarter.
World trade in services
Most of the barometer component indices remain below trend, but some appear to have bottomed out.
This includes passenger air transport (49.2), which is the sector most affected by the Covid-19 pandemic.
Container shipping (92.4), construction (97.3) and the global services PMI (97.0) also show signs of a sea change.
The PMI is noteworthy as it is the most forward-looking component of the barometer.
Meanwhile, the ICT services index fell further to 94.6 despite strong demand for these services during the pandemic.
The financial services index (100.3) was the only component whose behavior remained in trend.
“Global services trade probably remained well below trend in Q2 2020 due to the economic situation caused by Covid-19, but the latest reading from the WTO Barometer on Trade in Services also shows increases. moderate in some key sectors, which seems to indicate a certain degree of resilience in the face of the pandemic,» said the WTO on Thursday.
«Most of the component indices of the barometer remain below trend, but some show signs of bottoming out,» the WTO added, referring to a turning point in world trade in services.
