Page 465 - ES 2020-21_Volume-1-2 [28-01-21]

92 Economic Survey 2020-21 Volume 2

the index and 18.6 points down from the same period last year. However, it improved to 100.7
1
in September, 2020, indicating a strong rebound in trade in the third quarter as lockdowns were
eased, broadly consistent with the WTO's October trade forecast.
3.4 The impact on trade differed significantly across regions. In 2020 (upto Q3), AEs suffered
the steepest decline in exports by 12.9 per cent and imports by 10.8 per cent, while EMDEs
witnessed lower contraction in exports by 7.6 per cent and in imports by 10.1 per cent. Among the
EMDEs, South East Asian export-oriented countries witnessed still lower shrinkage of exports
by 2.4 per cent and imports by 9.6 per cent.This can be attributed to the impressive export
performance of few countries such as Vietnam, Taiwan, and Malaysia, and their continuous
narrowing contraction in imports in subsequent quarters (Figure 2).
Figure 2:Trends in World Merchandise Trade
Exports Imports
20 30
Growth rate (Y-o-Y), Per cent -10 5 0 Growth rate (Y-o-Y), Per cent -10 0
15
20
10
10
-5
-20
-15
-20
-40
-25 -30
World Advanced EMDEs SE Asia India World Advanced EMDEs SE Asia India
Economies Economies
2016 2017 2018 2019 2020 (Upto Q3) 2016 2017 2018 2019 2020 (Upto Q3)
Source: WTO

3.5 The impact on trade also varied significantly across different types of goods. While trade
in agricultural products fell less than the world average in the second quarter of 2020 (-5 per
cent versus -21 per cent), it fell precipitously for fuels and mining products (-38 per cent) as
prices collapsed. Further, the trade in automotive products recorded the biggest decline, though,
it rose for telecommunication equipment (which includes smartphones), electronics (to facilitate
working from home), and pharmaceuticals.

3.6 As per IMF’s October Global Financial Stability Report 2020, near-term global financial
stability risks have been contained for now due to the unprecedented and timely policy responses
to maintain the flow of credit to the economy and avoided adverse macro-financial feedback
loops, thereby creating a bridge to recovery. However, vulnerabilities have increased in the non-
financial corporate sector, as firms have taken on more debt to cope with cash shortages and in the
sovereign sector, as fiscal deficits have widened to support the economy. EMDEs rely primarily
on commodity exports, remittances and tourism for forex earnings, all of which plummeted as the
pandemic unfolded. However, its impact on EMDEs so far has been milder than expected as just
six countries – Argentina, Ecuador, Belize, Lebanon, Suriname and Zambia – have defaulted on
their sovereign debt and only the first two restructured their debts. Potential debt defaults could
ensue in 2021 as a large amount of foreign debt is estimated to be due for repayment in that year.
The future path of defaults will ultimately be shaped by the extent of continued policy support and
1 WTO’s goods trade barometer index is a leading indicator that signals changes in world trade growth two to three months ahead of
merchandise trade volume statistics. Its baseline value is 100, a value greater than 100 suggests above-trend growth while a value below 100
indicates below-trend growth.