Photo credit: International Maritime Organization
Despite a sharp fall in global trade in 2020 due to the coronavirus pandemic and lingering trade tensions, the Asia-Pacific region is expected to perform better than the rest of the world, the United Nations development arm in the region has said.
While worldwide trade is expected to fall by 14.5 percent in 2020, Asia-Pacific trade could contract by a relatively modest 1.9 percent.
As a result, the region’s share in global merchandise export and import is expected to rise to an all-time high in 2020 – to 41.8 percent and 38.2 percent respectively. These figures are up from 39.9 percent and 36.9 percent a year earlier.
The estimate has been prepared by the UN Economic and Social Commission for Asia and the Pacific (ESCAP).
The UN body also cautioned that the path towards a full trade recovery remains “highly uncertain”. There are unfavourable macroeconomic conditions in many economies – including high unemployment, debt, deflation, and underlying structural challenges – which will all impede a rapid economic rebound.
Smaller economies face additional obstacles due to the pandemic’s impact on travel and tourism, as well as remittances from expatriate citizens working abroad.
According to Armida Salsiah Alisjahbana, Executive Secretary of ESCAP, Covid-19’s devastating effect on both developed and developing economies also risks pushing millions back into poverty in the Asia-Pacific.
“I urge countries in the region to work towards developing a better set of trade rules that are resilient in times of crisis and stimulate sustainable economic recovery for inclusive and greener economies,” Alisjahbana said.
Alongside trade, foreign direct investment (FDI) also suffered an “immediate and significant” impact due to the global crisis.
“While data is still being collected on all forms of FDI, quarterly figures from announced ‘greenfield’ investments clearly demonstrate how hard the region has been hit,” ESCAP said, referring to investments into new projects starting from scratch.
In the first three quarters of 2020, ‘greenfield’ FDI dropped by 40 percent compared to the same period in 2019, depressed primarily by the impact of lockdowns that resulted in delayed and cancelled projects.
ESCAP added that FDI is expected to remain below pre-crisis levels throughout 2021, with the future outlook “highly uncertain” and dependent on the duration of the Covid crisis, the effectiveness of policies to stimulate investments, and recovery from the socio-economic effects of the pandemic.