COVID-19 AND WORLD TRADE
Most LDCs have experienced a significant decline in export earnings since the outbreak of COVID-19. The report anticipates that the downturn in world trade in 2020 will continue to be particularly severe for LDCs.
LDC exports of textiles and clothing have been badly affected by declining global demand and supply chain disruptions. In addition, LDCs that depend on tourism revenues are being hard hit by the slump in this sector.
There are currently 47 LDCs, 36 of which have become WTO members. The full list of LDCs can be found here.
The note underscores that the pandemic is undermining the development gains of countries such as Angola, Bangladesh and Vanuatu that are expected to graduate from LDC status in the near future.
The note also collates the measures that LDCs have taken to combat the pandemic, ranging from strengthening health care systems to providing stimulus packages to export-oriented sectors and liquidity support for small and medium-sized enterprises.
In early May, the LDCs group called on other WTO members to refrain from imposing export prohibitions or restrictions on medical goods and food. They urged governments to facilitate trade in these goods, including by implementing the provisions in the WTO’s Trade Facilitation Agreement.
The report notes that the international community is seeking to support LDCs’ participation in world trade by providing debt relief and strengthening social sectors.
The report can be found here.
- Among the COVID-19 pandemic’s far-reaching consequences for the global economy, the least developed countries (LDCs) face the most daunting challenges. A lack of resources to support an economic rebound is compounded by LDCs’ dependence on a limited range of products exported to a few markets, some of which have been those worst affected by the COVID-19 outbreak. The pandemic threatens to derail hard-won development gains in LDCs.
- The year 2020 started against the backdrop of a subdued trade performance in 2019. The value of LDC exports of goods and services declined by 1.6 per cent in 2019, a greater decline than that of world exports (1.2 per cent). Consequently, the share of LDCs in world exports also registered a marginal decline, falling to 0.91 per cent in 2019. The expected downturn in trade in 2020 is likely to be even more severe for LDCs than at the global level.
- The pandemic has accentuated the slump in oil prices seen in 2019. Declining demand, as well as supply disruptions, have weighed significantly on LDC exports, especially exports of textiles and clothing products. LDCs dependent on tourism revenues have seen the sector come to a virtual standstill. As migrant workers from LDCs return from host countries affected by the pandemic, flows of remittances – a critical source of foreign exchange for many countries – have dramatically dried up. All of these factors are predicted to worsen further in the coming months.
- The ongoing pandemic may affect the near-term prospects for some countries to graduate from LDC status. Angola and Vanuatu, which are scheduled to graduate soon, and LDCs such as Bangladesh, which are on the path to graduation in the next few years, have been experiencing unavoidable declines in economic growth and export earnings.
- The LDCs have called for countries to refrain from export prohibitions and restrictions on medical goods and food, of which many are net importers. Several LDCs have lowered duties on medical goods to ensure their availability at more affordable prices to their citizens.
- Since the start of the pandemic, at least two-thirds of LDCs have put in place a variety of lockdown measures. Some LDCs have announced stimulus packages, which have covered export-oriented sectors. They have also strengthened healthcare systems and ensured social relief packages and liquidity support to small and medium-sized enterprises (SMEs).
- The international community has announced support measures ranging from debt relief to strengthening social sectors and providing social safety nets for the most vulnerable. Maintaining this momentum, while redoubling coordination efforts, remains vital as the world moves towards economic recovery.