Global Trade Set To Dive In 2020 & 2021 Due To COVID-19 & How To Bounce Back

GLOBAL TRADE
SET TO DIVE IN 2020 & 2021
DUE TO COVID-19
&
HOW TO BOUNCE BACK
SS HEADWAY CONSULTING
By Sultan Suleman Chaudhry

Global Trade was considerably slowing back
in 2019 preceding COVID-19 infection which
struck everyone hard and fast, overloaded
by trade tensions between the United States
- China, that engulfed other major exporting
countries into the ongoing feud and the rest
was due to slowdown in economic growth.
BACKGROUND
Global Trade Set To Dive In 2020 & 2021 Due To COVID-19 & How To Bounce Back By Sultan Suleman Chaudhry

Even before the COVID-19 virus started in Wuhan,
China, the Korean economy was already in doldrums
because it was being affected by fall in foreign
investments and sharp fall in exports on the pretext
of trade tensions between the US & China and not to
mention the recent trade tensions between South
Korea & Japan, which was adding more pressure to
the Korean economy.
BACKGROUND
The South Korean
Economy

The Korean Government tried to
absorb the shocks on the economy
by more social spending but the
local weak labour market outlook
did not help the cause to increase
local consumption.
BACKGROUND
The South Korean
Economy

South Korea reported its first patient of COVID-19 on
the 20th January 2020 and as of today the virus has
infect 10,591 people and killing 225, while testing
over half a million people, which was the key to
contain the virus. Not to mention that 7,616 people
have been recovered so far here.
World over the virus has infected almost 2 million
people and killing 126,720 so far.
BACKGROUND
COVID-19 In South Korea
&
The World

When the COVID-19 started back in December
2019 in Wuhan, China, no one imagined that
the infection would grow exponentially, cross
the Atlantic, kill so many people around the
globe in no time and no one was ready for the
sudden and adverse impact it might have on
their economies.
BACKGROUND
The Reach Of
COVID-19

There were already speculations even before
the virus started that alone the trade tensions
between the US and China as well as
slowdown in China alone has the capacity to
bring about a global recession.
BACKGROUND
The Global Trade

Even though South Korea has
successfully flattened the COVID-19
curve and kept the economic
wheel moving even when the virus
was at its peak but the adverse
effects to the economy are not just
due to contraction in local
consumer demand but also global.
Impact Of
COVID-19
On Global Trade

Once the virus spread at such an alarming
rate with high death rate, the only way to stop
the spread was to observe social distancing
that resulted in partial or complete lock
downs in different cities around the world
and even stop international travel.
People are confined to their home and
working from home has become the new
norm, to stop the spread of the virus.
THE
GROUND
REALITY

All this had a negative outlook on the
world economies, as consumer demand
in China and other parts of the world
was already weak but now the demand
has depleted even further due to the
virus.
THE
GROUND
REALITY
Impact On
Economy

The IMF in its latest report stated that
the global economy will contract 3
percent in 2020 due to COVID-19, as the
world could experience the worst
recession since the Great Depression in
the 1930s.
THE
GROUND
REALITY
IMF's Forecast

When the domestic demand is affected
severely, this does not represent a
healthy outlook for the major exporting
countries especially the ones whose
tradable sectors weigh more than their
services sector exports such as South
Korea, where they are unable to
maintain the right balance between the
two.
THE
GROUND
REALITY
Both Domestic &
Global Demand
Decline

The worldwide economy is confronting
developing dangers of slipping into
downturn as the quick spread of the
novel coronavirus has disturbed supply
chains in the midst of an easing back
Chinese economy and devastated the
local and world travel industry.
THE
GROUND
REALITY
Impact
Of COVID-19

All the major experts, WTO, the IMF and
World Bank forecast that the major
economies will experience economic
contraction and we may fall into
recession and major exporting countries
see double digit decline in their exports,
because there are no signs of COVID-19
abating anytime soon.
THE
GROUND
REALITY
Heading Towards
Recession

The recovery of world economies and
how quick we come out of recession,
depends that how soon the virus is
contained, quarantine is lifted, consumer
demand increases and so does the
export and consumption.
THE
GROUND
REALITY
Recovery

What we all need to understand is that
contraction in world economies and the
sudden decrease in global trade and
yield have excruciating ramifications
both short and long term not just for the
organisations but for communities as a
whole because everyone is somehow
affected by virus either physically or
financially.
THE
GROUND
REALITY
Wider Impact Of
COVID-19

Even though South Korea in particular
has done a great job in controlling the
virus, keeping the economic wheel
moving in tough times, which IMF did
praise in its latest report but also
stressed the importance of South Korea’s
trading partners which it relies heavily
on for exports as well as supply chain.
THE
GROUND
REALITY
IMF Praises
South Korea

First the IMF report praises South Korea’s
response to the pandemic as, “The
forecast embodies Korea's
comprehensive approach in containing
the COVID-19 outbreak and quick
economic policy response, which have
helped mitigate the negative impact on
domestic activity”.
THE
GROUND
REALITY
IMF Praises
South Korea

Second a word of caution and advice
from IMF as, “However, given Korea's high
degree of openness, the growth
prospects are constrained by very weak
external demand, as reflected in sharply
lower growth projections for Korea's
main trading partners”.
THE
GROUND
REALITY
Caution
From IMF

Challenges and Opportunities
As far as South Korea is concerned,
already the overall economic outlook is
not very good and will continue the
downward trajectory if the virus is not
contained soon globally.
GLOOMIER
GLOBAL TRADE
OUTLOOK FOR
2020 & 2021

According to S & P Global Ratings Report
predicts that the Korean economy will
contract in 2020 as well as other Asian
pacific economies.
GLOOMIER
GLOBAL TRADE
OUTLOOK FOR
2020 & 2021

Korean firms belonging to the refining
and chemical, steel, airline, retail, auto,
and technology sectors are all highly
exposed.
China's GDP growth rate slow to 2.9
percent in 2020.
Economies in South Korea, Hong Kong,
Singapore and Japan will contract.
The average economic growth rate for
Asia-Pacific region as a whole will be 2.7
percent in 2020.
AS PER THE REPORT:

The dollar value of world
merchandise exports in 2019 fell by
3% to US$ 18.89 trillion.
Commercial services trade
increased in 2019, with

exports in dollar terms rising by 2%
to US$ 6.03 trillion.
ACCORDING TO WORLD
TRADE ORGANISATION:

The decline in Global Trade is not only due to
consumer demand but also because disruptions
have occurred in international supply chains for
various sectors such as retailers, automobiles
manufacturers and tech companies due to policy of
social distancing to stop the spread of the virus
around the globe and particularly in China, which is
a manufacturing hub for various companies from
around the world.
GLOOMIER
GLOBAL TRADE
OUTLOOK FOR
2020 & 2021

THE TOP 10
GLOBAL
EXPORTERS
THE TOP 10 EXPORTERS OF GOODS
IN 2019 ARE:
1-       China
2-       United Stated
3-       Germany
4-       Netherland
5-       Japan
6-       France
7-       South Korea
8-       Hong Kong
9-       Italy
10-     United Kingdom

THE TOP 10
GLOBAL
EXPORTERS
FOR THEIR INDIVIDUAL
SHARE PLEASE REFER
TO PICTURE 1.

Top 10 account for 51.3 % of the
total Global Trade.
total Global Trade.

SOME FACTS FROM THE
WTO REPORT:

Exports from 1st April to 10th April are $12.21
billion.
This shows that exports are down 18.6
percent from $15.01 billion from the same
period a year earlier.
Cars 7.1 %
Auto-Parts 31 %
Semiconductors 1.5 %
Petrochemicals 47 %
Wireless Communications Devices 23 %

If we break down exports from South Korea by
category, the details of declines are as:

FOR SOUTH KOREA:

THE TOP 10
GLOBAL
IMPORTERS
THE TOP 10 IMPORTERS OF GOODS
IN 2019 ARE:
1-               United States
2-              China
3-              Germany
4- Japan
5-              United Kingdom
6-              France
7-              Netherland
8-              Hong Kong
9-              South Korea
10-           India

THE TOP 10
GLOBAL
EXPORTERS
FOR THEIR INDIVIDUAL
SHARE PLEASE REFER
TO PICTURE 2.

total Global Trade.
total Global Trade.

SOME FACTS FROM THE
WTO REPORT:

Global Trade will decline by 13 % compared to 2019.
The Following Is The Data From WTO’s Optimistic Scenario
For Global Merchandise Trade 2020 & 2021

Global Trade will decline by 32 % compared to 2019.
The Following Is The Data From WTO’s Pessimistic Scenario
For Global Merchandise Trade 2020 & 2021

HOW TO BOUNCE BACK

The global trade outlook
does not look pretty for
at least 2020 if not also
for 2021 and I believe
first we need to address
and find answers to the
following pressing issues:

How To Bounce Backa)
There is no vaccine for the virus yet and it might take over a year for it to be
made and everyone need to work collectively in finding one soon as possible.

b)
Developed countries should start immediate clinical tests on antibody-based
treatment for the novel coronavirus and pool their resources in finding one.

c)
We don’t know for sure when the world might be able to contain the virus.

d)
There have been few cases of reinfection and health authorities around the
world need to find the possible causes of reinfection soon,which is a new
dangerous trend.

How To Bounce Back
e)
How long the complete or partial shutdown will last in different cities/regions around the
world.
f)
Even if we have some form of normalcy how would it work and things are not going to be
the same again.

g)
If the virus returns, how lethal would the second strain be, its effects & would counter
measures be in place.

h)
For how long governments can support financially various business sectors and its people.
i)
For how long business and people can cope with such financial losses and at what cost.

Subsidies and tax incentives.
Tax breaks.
Interest free loans.
Subsidies for wages and salaries.
Special Packages for SME’s.
Flexible working hours.





What the
governments
can do
INDIVIDUALLY
to help the
global trade:
How To Bounce Back

Favourable business conditions and ease of doing
business.
Standard SOP’s on working conditions in quarantine.
Preventive Measures.
Central Banks to keep interest rates low as possible.
When government is developing new trade policy or
any support package there should be strategic
cooperation. between private and public sectors,
exporters and policy makers.



What the
governments
can do
INDIVIDUALLY
to help the
global trade:
How To Bounce Back

United States & China should end their trade
war.
The US & China need to scale back their trade
tariffs for at least 1 year to prior to the trade war.
Pool resources & knowledge to contain and end
the virus.
Diversify trade partners and supply chains.
Reduce any trade frictions.




What the
governments
can do
COLLECTIVELY
to help the
global trade:
How To Bounce Back

What the
governments
can do
COLLECTIVELY
to help the
global trade:
Reduce unnecessary bureaucratic hurdles and further
streamline trade procedures and operations.
A future mechanism as how to deal and settle trade
disputes once back to normal.
WTO, IMF and World Bank need to support and help
under developed and developing countries to boost
their exports that are worst affected by the COVID-19
financially. This in turn will also help to push for
poverty reduction in these regions.
Opening and transforming new world markets.

How To Bounce Back

ADDRESS
PHONE
WEBSITE
Yangchungu Sinwol 1 Dong, Seoul, SEOUL
158-090,
South Korea
+82-10-3980-2217
www.ssheadwayconsulting.com
LET'S WORK
TOGETHER!
EMAIL
ssheadwayconsulting@gmail.com

Global Trade Set To Dive In 2020 & 2021 Due To COVID-19 & How To Bounce Back

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Global Trade Set To Dive In 2020 & 2021 Due To COVID-19 & How To Bounce Back