Prospects for service trade recovery remain poor – WTO

The World Trade Organization (WTO) has noted that prospects for global service trade recovery remain poor due to restrictions and lockdowns in most countries as a result of the coronavirus pandemic.

The WTO said preliminary data further suggest that, in November, services trade was still 16% below 2019 levels. Prospects for recovery remain poor since the second wave of COVID-19 infections necessitated new, stricter lockdown measures in many countries, with tightened restrictions on travel and related services extending into the first quarter of 2021.

The latest statistics, according to the WTO, confirm earlier expectations that services trade would be harder hit by the pandemic than goods trade, which was only down 5% year-on-year in the third quarter.

Foregone expenditures on tradeable services, the WTO added, could be directed elsewhere, with consumers shifting to goods instead.

“Unlike goods, services cannot be stockpiled, which means that despite pent-up demand, many of the revenue losses from cancelled flights, holidays abroad, restaurant meals, and cultural/recreational activities are likely to be permanent.

“Travel remains the most affected service sector, down 68% globally compared with the same period of 2019. In the third quarter of 2020, spending by international travellers was down 88% in Latin America and the Caribbean, 80% in both Asia and Africa, 78% in North America, and 55% in Europe.

“The relaxation of travel restrictions in Europe during the summer months produced only a modest rebound in services trade in the third quarter.

“Trade in “Other services”, such as construction, recreational, legal, and financial services, repeated its uneven performance: most sub-sectors contracted, with computer services a notable exception. With building projects delayed or postponed in many countries due to the pandemic, global construction exports were down 16% year-on-year, as several Asian exporters saw sharp drops. Audio-visual, artistic and recreational services also saw double-digit declines (-14%), with the United States’ exports down 24% and the United Kingdom’s cut nearly in half (-45%). Legal, management, accounting, and advertising services saw a tepid year-on-year rebound of 1%.

“Financial services increased by 2% globally, with exporters in different regions recording positive growth. This includes the European Union, whose financial services exports were up 4% year-on-year. Computer services remained the most dynamic sector in the third quarter, up 9% due to increasing global demand for cloud computing, platforms and virtual workplaces.”