This year's outlook on services trade uncertain amid Covid-19: WTO

Readings greater than 100 suggest above trend growth. The direction of change reflects momentum compared to the previous month
Even as global services trade picked up in the last quarter of 2020, outlook for the current year remains uncertain due to uneven distribution of vaccines and the emergence of new strains of Covid-19, the World Trade Organisation (WTO) has said.

WTO’s Services Trade Barometer (STB) rose sharply to 104.7 during October-December 2020, higher than the baseline value of 100 and well above the low of 91.2 seen earlier due to the economic fallout of the pandemic.

STB combines six component indices — global financial services transactions; indices for container port throughput; construction; global services Purchasing Managers’ Index (PMI); passenger air transport; and, information, computer and telecom (ICT) services. WTO launched the barometer in 2019 as a part of its efforts to develop new insights into services trade. It is released biannually.

Readings greater than 100 suggest above trend growth. The direction of change reflects momentum compared to the previous month.

“Services trade plunged in the second quarter of 2020 and remained weak in the third quarter despite the relaxation of lockdowns in many countries. Once they become available, statistics for services trade in the fourth quarter should show faster growth, although travel restrictions and lockdowns related to the resurgence of Covid-19 could still weigh on the recovery in the first quarter of 2021,” the global trade body said on March 11.

SBT indices, however, are mixed. Barring passenger air transport and weak ICT index, readings of the remaining indices were above 100.

According to WTO, partial recovery can be expected in international passenger flights during the second and third quarters of 2021, but is largely dependent on successful vaccination. “Recovery over the longer term could be undermined if new variants of Covid-19 become more widespread,” it said.

“The financial services index (119.9) had an especially strong showing due to rising international transfers. Indices for container shipping (104.3), construction (106.3) and the global services PMI (105.3) were also above trend. Passenger air transport (81) remains depressed due to travel restrictions. The ICT index (93.7) dipped due to weakness in some computer services, while telecom services remained steady,” it said.

Over the last few years, India has maintained a dominant position in services trade as compared to goods trade. The case in point being that goods trade has been getting more affected by tensions as well as protectionist attitudes adopted by countries. According to official data, services exports stood at $18.72 billion in December, up 10 per cent sequentially, whereas imports stood at $11.50 billion, up 9.2 per cent.

In February, a similar WTO barometer for goods trade showed that volume growth in global merchandise trade remained strong in the last quarter of 2020 after a rebound in the previous quarter. It also said the pace of expansion is unlikely to sustain in the first half of 2021. The barometer’s reading was 103.9.

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