Trade in the time of corona : broken chains and mended barriers

In light of the unprecedented mutation of the COVID-19 pandemic into a global economic recession, the WTO projects world trade volume to plummet by a staggering 13 percent to 32 percent in 2020. This translates to large-scale losses in global output and employment, especially in trade-oriented emerging economies such as the Philippines. Recovering from this dystopic scenario greatly depends on the duration of the outbreak, the downside risks from protectionist tendencies, the severity of the global recession, and the ability of world leaders to come up with a coordinated policy response. This paper provides a quick assessment of the major risks that must be dealt with to overcome these "four horsemen of trade apocalypse". Anchored on the WTO projections, this paper also assesses the short term prospects for Philippine trade. The results of the forecasting exercise suggest that Philippine merchandise exports could plummet in 2020 by 17.2 percent in the optimistic scenario and 39.5 percent in the pessimistic scenario. Compared to the pre-pandemic government target, the pessimistic case suggests that the country could lose up to US$31 billion export revenues this year due to the COVID-19 crisis. Merchandise imports will also experience a similar decline, albeit less severe. While the negative impact will likely be felt by all sectors, the biggest plunge is expected to be in electronics and other industries that are strongly connected to global production networks. On a positive note, Philippine exports and imports are expected to recover in 2021, albeit not fully, if the global public health crisis is resolved sooner than later.