Covid-19 Impacts on Globalization

This page provides trend charts and forecasts on the unfolding impact of the Covid-19 pandemic on trade, capital, information, and people flows. It will be updated periodically as new data come available.

Trade Flows

Monthly data show how trade flows plunged early in the Covid-19 pandemic and then started to recover. The following charts track changes in the value of monthly merchandise exports and imports on a seasonally adjusted basis for countries/regions adding up to about two-thirds of world trade. They are indexed to equal 1 in December 2019, before the onset of the crisis.

Seasonally adjusted monthly trade flows are down significantly for most major economies during the crisis Seasonally Adjusted Monthly Merchandise Trade Exports up 10% Dec to Aug Exports down 7% Dec to Jul Exports down 6% Dec to Aug Exports down 13% Dec to Aug European Union United States China Japan & Korea Jan 2019 Mar May Jul Sep Nov Jan 2020 Mar May Jul Jan 2019 Mar May Jul Sep Nov Jan 2020 Mar May Jul Jan 2019 Mar May Jul Sep Nov Jan 2020 Mar May Jul Jan 2019 Mar May Jul Sep Nov Jan 2020 Mar May Jul 0.0 0.2 0.4 0.6 0.8 1.0 1.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 Exports Imports USD Index; December 2019 = 1.0. Source: OECD (Last updated: October 7, 2020)

Full-year trade volume growth forecasts for 2020, including both goods and services, have been downgraded due to Covid-19, far outpacing 2019 downgrades driven by the US-China trade conflict. The following animated chart shows the last four IMF trade growth forecasts for 2020 and 2021, with 2018 and 2019 trade growth for reference.

As recently as January, the IMF projected positive global trade growth in 2020, but this has since been downgraded to an 11.9% decline, followed by a partial recovery in 2021. IMF World Economic Outlook Trade Forecast Forecast as of October 2019 -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 2018 2019 2020 2021 Source: IMF (Most recent forecast: June 24, 2020) IMF World Economic Outlook Trade Forecast Forecast as of January 2020 -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 2018 2019 2020 2021 Source: IMF (Most recent forecast: June 24, 2020) IMF World Economic Outlook Trade Forecast Forecast as of April 2020 -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 2018 2019 2020 2021 Source: IMF (Most recent forecast: June 24, 2020) IMF World Economic Outlook Trade Forecast Forecast as of June 2020 -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 2018 2019 2020 2021 Source: IMF (Most recent forecast: June 24, 2020) IMF World Economic Outlook Trade Forecast -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 2018 2019 2020 2021 Source: IMF (Most recent forecast: June 24, 2020)

The IMF forecast (June 24), used in the animation above, called for an 11.9% decline in 2020 and an 8.0% increase in 2021 in volume terms. The OECD (June 10th) analyzes scenarios with or without a second Covid-19 outbreak in late 2020. Without a second outbreak, trade falls 9.5% in 2020 and rises 6.0% in 2021. With a second outbreak, trade drops 11.4% in 2020 and rises 2.5% in 2021. The latest forecasts from the World Bank (released June 8th) call for trade to shrink 10-24% in 2021. In their base case, trade falls 13.4% in 2020 and grows 5.3% in 2021. Note that all of these forecasts cover trade volume, not trade value, which could fall more steeply because of lower commodity prices.

Major forecasters predict a very large decline in trade in 2020, followed by a partial rebound in 2021. Recent World Trade Volume Forecasts 2020 Forecast: -11.9% 2020 Forecast: -9.5 to -11.4% 2020 Forecast: -10.2 to -23.8% IMF OECD World Bank 1980 1990 2000 2010 2020 1980 1990 2000 2010 2020 1980 1990 2000 2010 2020 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 Trade volume index, 1980=1. Sources: IMF (Forecast date: June 24, 2020), World Bank (Forecast date: June 8, 2020), OECD (Forecast date: June 10, 2020).

To provide a sense of how Covid-19 is affecting trade relative to economic output, the following charts track global trade intensity in volume terms. Since trade is expected to shrink faster than GDP, trade intensity is set to decline in 2020. However, most forecasts imply that this metric will not fall below its lowest level during the 2008-09 global financial crisis. Again, trade intensity in value terms could fall more sharply, but we focus here on trade volume to remove commodity price effects.

Major forecasters predict a very large decline in trade in 2020, followed by a partial rebound in 2021. Trade Volume Intensity Implied by Recent Forecasts 2020 Forecast: -7.4% 2020 Forecast: -3.7 to -4.1% 2020 Forecast: -6.7 to -17.4% IMF OECD World Bank 1980 1990 2000 2010 2020 1980 1990 2000 2010 2020 1980 1990 2000 2010 2020 0.0 0.5 1.0 1.5 2.0 2.5 0.0 0.5 1.0 1.5 2.0 2.5 0.0 0.5 1.0 1.5 2.0 2.5 Trade intensity volume index, 1980=1. Sources: IMF (Forecast date: June 24, 2020), World Bank (Forecast date: June 8, 2020), OECD (Forecast date: June 10, 2020).

Capital Flows

The UN Conference on Trade and Investment (UNCTAD) forecasts a 30-40% decline in foreign direct investment (FDI) inflows in 2020. FDI flows largely reflect multinational firms buying, building, or reinvesting in operations abroad.

Although a 30-40% decline is projected for 2020, FDI flows have historically been quite volatile. Worldwide Foreign Direct Investment (Inflows) 2020 Forecast: -30 to -40% 0.0 0.5 1.0 1.5 2.0 2.5 1980 1990 2000 2010 2020 USD Trillions Source: UNCTAD (Forecast date: 16 June 2020)

Focusing specifically on emerging economies, the World Bank forecasts a 20% decline in remittances sent back home by migrants living and working abroad. Meanwhile, the Institute for International Finance has also forecasted large declines in foreign portfolio investment in emerging markets.

Remittances to low and middle income countries are projected to drop 20%, while portfolio investment is projected to fall into negative territory. Remittances to Low and Middle Income Countries 2020 Forecast: -20% 0 100 200 300 400 500 600 1980 1990 2000 2010 2020 USD Billions Source: World Bank (Forecast date: April 22, 2020) Non-Resident Portfolio Investment in Emerging Markets (Excl. China) Equity Debt Below 0 = Net Outflow -101% -300% -100 0 100 200 300 2014 2016 2018 2020 USD Billions Source: Institute for International Finance (Forecast date: April 9, 2020)

Information Flows

Large increases in internet traffic have been recorded since the onset of the pandemic, but we do not yet have separate data available on international internet traffic. So, these data do not necessarily imply an increase in the globalization of information flows during this period.

 

Internet traffic has grown substantially between December and April in most countries. Internet Traffic Growth (Mid April 2020 vs. Late December 2019) India France Italy Canada United Kingdom Australia Spain Portugal Brazil United States 0% 10% 20% 30% 40% 50% Source: Cloudflare (Last updated: April 23, 2020)

People Flows

Airlines have reduced international capacity more sharply than domestic capacity. Recently, OAG data showed an 70% reduction in worldwide international capacity, as compared to a 30% drop in domestic capacity. In the US, the number of travelers passing through TSA security checkpoints was down 71% as of early October. This metric had been down about 96% in mid-April 2020 but has started to grow again.

Both domestic and international flights have taken a hit, but international flights have fallen more Global Scheduled Airline Capacity (Millions of Seats, Weekly) Domestic Inter- national -30% -70% 0 30 60 90 120 Feb Mar Apr May Jun Jul Aug Sep Oct Millions Data Source: OAG (Last updated: October 5, 2020) US Daily TSA Checkpoint Travelers (Change vs. same day 2019) -71% -100% -80% -60% -40% -20% 0% Mar Apr May Jun Jul Aug Sep Oct Data Source: TSA (Last updated: October 07, 2020)

Global scenario analyses for the full year of 2020 call for very steep drops in international travel. The International Civil Aviation Organization (ICAO) foresees a 44-80% drop in international air passengers, and the UN World Tourism Organization (UNWTO) anticipates a roughly 60-80% decline in international tourist arrivals across all modes of transportation. International tourist arrivals fell 97% in April 2020.

Measured both in terms of air passengers and international arrivals, forecasts predict a significant downturn for tourism. International Air Passengers 2020 Forecast: -44 to -80% 0.0 0.5 1.0 1.5 2.0 1980 1990 2000 2010 2020 Billions Source: ICAO (Last updated: April 27, 2020) Total International Arrivals 2020 Forecast: -58 to -78% 0.0 0.4 0.8 1.2 1.6 1980 1990 2000 2010 2020 Billions Sources: UNWTO, Our World in Data (Forecast date: May 2020)

What about globalization’s prospects after the Covid-19 pandemic?

This topic is a major focus of our team’s ongoing research. For a preliminary take, refer to this May 2020 article.