Global Trade Recovered Before COVID-19... Expected to Offset Service Sector Weakness

Differences in Recovery Speeds Between Countries Narrow, Uncertainty Decreases... Dollar Weakness Expected to Continue

On the 16th of last month, a container ship was loading cargo at Gammam Pier in Busan Port. [Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Led by China, the scale of global trade has recovered to a level close to that before the COVID-19 pandemic. This is expected to partially offset the delayed recovery of the service sector caused by the resurgence of COVID-19. The gap in recovery speed between countries is narrowing, while the dollar is expected to remain weak.

On the 26th, KB Securities diagnosed that the global trade trend is showing such a recovery. According to the Netherlands Bureau for Economic Policy Analysis (CPB), the global trade index in September recovered to the level of February, before the full onset of COVID-19. Considering that China’s exports, which account for 12.2% of global trade, increased by up to 22% year-on-year last month, it is analyzed that global trade recovery has already surpassed pre-COVID-19 levels. Hyojin Kim, an economist at KB Securities, explained, "The worsening COVID-19 situation in the US and Europe continues, and concerns about variant coronaviruses have also emerged, so the recovery of the service sector is likely to be further delayed. However, global trade, which has already recovered to pre-COVID-19 levels, will play a buffering role that partially offsets the delayed recovery of the service sector."

The center of global trade recovery is China. China’s exports, which recorded a slight decrease last year, showed growth beyond recovery with a 2.5% increase year-on-year from January to November this year. Additionally, the number of countries returning to export recovery is increasing. In August, except for China and Vietnam, most countries saw a sharp decline in trade compared to the previous year. However, since October, countries such as Indonesia, Taiwan, Korea, Switzerland, and Mexico have shown growth compared to the previous year, indicating recovery. Furthermore, Brazil and Thailand are also showing a recovery trend with export growth rates close to zero year-on-year.

Particularly, attention was drawn to the narrowing gap in recovery between countries. Economist Kim said, "The view that economic recovery will proceed unevenly by country depending on the scale of COVID-19 damage and the proportion of services such as tourism remains unchanged, but the number of countries showing progress in trade recovery is increasing." He added, "Although the situation is still uneven, considering that many emerging countries such as Indonesia and Mexico, in addition to China, are included in the recent trade recovery, the gap between countries is narrowing rather than widening." This trend is also reflected not only in global trade but also in country-specific leading economic indicators. According to the leading economic index calculated by KB Securities for nine countries and regions, emerging countries showed both a stronger rebound from the lowest point and a larger increase over the past two months compared to developed countries.

Meanwhile, along with this, the dollar is expected to remain weak based on a preference for risk assets. As the number of countries where trade and the economy have begun to recover increases, uncertainty in economic recovery is diminishing. In addition, as the number of countries with recovering exports increases, conditions are expected to be created where investment funds spread to multiple countries rather than concentrating in the United States.

This content was produced with the assistance of AI translation services.