April 09, 2020: The World Trade Organization (WTO) has forecast that goods trade would shrink more steeply this year than during the global financial crisis a decade ago, and then rebound in 2021, as the coronavirus pandemic recedes - provided countries work together.
Given the unprecedented nature of the new coronavirus crisis, it is hard to determine precisely what its economic impact – and prospects for recovery – will be, the he Geneva-based trade body said. But WTO economists believe the decline in trade will exceed that brought on by the 2008-9 global financial crisis.
World merchandise trade is set to plummet by between 13 to 32 per cent, the WTO said, adding that a 2021 recovery in trade will depend on how long the outbreak lasts and how effective policy responses prove to be.
Nearly all regions will suffer double-digit declines in trade volumes this year, it said, with exports from North America and Asia hit hardest – and trade will likely fall steeper in sectors with complex value chains, such as electronics and automotive products.
Trade in services, meanwhile, is directly affected by COVID-19 pandemic, due to travel restrictions imposed by Governments worldwide to contain the spread of the virus, the WTO said.
"The immediate goal is to bring the pandemic under control and mitigate the economic damage to people, companies and countries, but policymakers must start planning for the aftermath of the pandemic", WTO Director-General Roberto Azevedo as he introduced the analysis.
"These numbers are ugly – there is no getting around that – b“ but a rapid, vigourous rebound is possible," he said. "Decisions taken now will determine the future shape of the recovery and global growth prospects."
He added: "We need to lay the foundations for a strong, sustained and socially inclusive recovery. Trade will be an important ingredient here, along with fiscal and monetary policy."
"Keeping markets open and predictable, as well as fostering a more generally favourable business environment, will be critical to spur the renewed investment we will need. And if countries work together, we
will see a much faster recovery than if each country acts alone."
The WTO's outlook came as the International Labour Organization (ILO) warned that the rapidly intensifying economic effects of COVID-19 on the world of work could be far worse than the 2008-9 financial crisis, with cutbacks equivalent to nearly 200 million full-time workers expected in the next three months alone.
Although all regions of the world are suffering from the fallout of COVID-19, Arab States and Europe have seen the worst impact on employment in percentage terms, the UN labour agency said. The biggest losses numerically are in the Asia-Pacific region – the world's most populous.
In a statement Wednesday, the WTO said that merchandise trade volume already fell 0.1 per cent in 2019, weighed down by trade tensions and slowing economic growth. In US dollar terms, exports fell by 3 per cent to $18.89 trillion.
The value of commercial services exports, meanwhile, rose 2 per cent to $6.03 trillion in 2019. However, the pace of expansion was slower than in 2018, when trade in services grew by 9 per cent.
Elaborating on its forecast, the WTO said that future trade performance is best understood in terms of two distinct scenarios - a relatively optimistic one, with a sharp drop in trade followed by a recovery starting later in 2020, and a more pessimistic one with a steeper initial decline and a more prolonged and incomplete recovery.
Both should be viewed as explorations of different possible trajectories for the crisis rather than specific predictions of future developments, it said, stressing that actual outcomes could easily be outside of the forecast range - either on the upside or the downside.
April 09, 2020: Top oil producers started a crucial meeting on Thursday to discuss a possible cut in output after a collapse in demand due to the coronavirus and a Saudi-Russian price war caused the market to crash.
The video conference meeting began shortly after 1440 GMT between OPEC, its OPEC+ allies including Russia and other key non-members.
Oil prices rose sharply as the meeting opened, extending earlier big gains, but then fell back again later to post more modest gains as nervous traders took profits in volatile business.
The meeting is seen as the best chance of providing support to prices which have been wallowing near two-decade lows.
Experts warn that without concerted action the commodity risks a steep sell-off.
Last week US President Donald Trump claimed Russia and Saudi Arabia would step back from their stand-off and agree to slash output.
Then OPEC kingpin Saudi Arabia called for an urgent meeting of producers "to try to reach a fair deal" to "stabilise the oil market" following a phone call between its Crown Prince Mohammed bin Salman and Trump.
Thursday's meeting intends to conclude an agreement to cut production by between 10 and 15 million barrels per day, Kuwait's Oil Minister Khaled al-Fadhel said in an interview with the Kuwaiti Al-Rai daily published Thursday.
Late Wednesday a spokesman for the Russian energy ministry told the TASS agency that Moscow was "prepared to cut 1.6 million barrels a day", which would be the equivalent of 14 percent of Russia's production in the first quarter of 2020.
Kremlin spokesman Dmitri Peskov in a press briefing on Thursday declined to give details, only saying Russia was in favour of "coordinated action to stabilise the global oil market".
- Global standstill -
"The extraordinary producing-countries meeting is the only hope on the horizon for the market that could prevent a total price collapse," said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
Saudi Arabia will on Friday host a separate virtual gathering of energy ministers from the G20 group of major economies in a similar bid to ensure "market stability".
Oil prices have slumped since the beginning of the year as the COVID-19 pandemic sends large parts of the planet into lockdown and brings the global economy to a virtual standstill.
Compounding the problem, Riyadh and Moscow have both ramped up output in a bid to hold on to market share and undercut US shale producers.
- Search for consensus -
"Saudi Arabia and Russia have been extremely clear that they will cut production if -- and only if -- other major oil producers join in as well," said SEB oil analyst, Bjarne Schieldrop.
However, there are worries about the participation of US producers.
The US is battling to breathe new life into its shale industry, which has transformed the nation into the world's top producer, but which cannot sustain its high cost base as prices collapse.
Yet its oil sector appears reluctant to trim production, having extracted a near-record 13 million barrels per day in the final week of March. This fell to 12.4 million bpd last week.
At the same time, the global supply glut -- already weighing on oil markets before the new coronavirus crisis -- has stretched oil storage capacity to its limits, forcing many producers to scale back output.
Trump on Wednesday told reporters that he wanted to save jobs.
"Obviously for many years I used to think OPEC was very unfair... I hated OPEC... But somewhere along the line that broke down and went the opposite way," he said.
Ten oil-producing nations from outside the wider OPEC+ alliance, including the United States, have been asked to take part in Thursday's meeting, Russian news agency TASS reported.
Canada, Britain, Norway, Brazil, Argentina, Colombia, Egypt, Indonesia, and Trinidad and Tobago have also been invited.
Norway's oil ministry confirmed in a statement Thursday that it was taking part in the meeting as an "observer".
The International Energy Agency warned Monday that the world is set for its first annual decline in oil consumption in more than a decade because of the coronavirus pandemic.
The outbreak has shut down large swathes of the global economy, including key sectors such as air travel, manufacturing and retail.
The global oil glut could reach 25 million bpd in April, according to Rystad Energy.
April 09, 2020: The oil market jumped Thursday as OPEC and its allies began discussing output cuts after a collapse in demand due to the coronavirus and a Saudi-Russian price war.
"The 9th (Extraordinary) #OPEC and non-OPEC ministerial meeting has started. The meeting is being held via webinar in light of recent developments surrounding the #COVID-19 pandemic," the crude producers' grouping tweeted, sparking prices to sharply extend earlier gains.
April 09, 2020: US unemployment is rising at a jarring rate, with data Thursday showing 17 million have lost their jobs since mid-March, as officials scramble to apply a tourniquet to stem the damage from the coronavirus pandemic.
The Federal Reserve launched a series of new lending programs Thursday to pump $2.3 trillion into the damaged US economy, but Fed Chair Jerome Powell tried to offer reassurance saying the recovery could be "robust." The Fed announcement came at the same time the Labor Department report showed 6.6 million more people filed for unemployment benefits last week, following 6.9 million in the prior week, and 3.3 million in the week ended March 21.
That is a stunning reversal from historically low unemployment in the world's largest economy, forced to shut down to stop the spread of COVID-19. Analysts expect the malaise to persist for months, with the jobless rate surging into double digits in April.
The weekly data indicate the coronavirus pandemic is set to eclipse job losses from the 2008 financial crisis, and International Monetary Fund chief Kristalina Georgieva warned Thursday that the world faces the worst global emergency since the Great Depression.
The 17 million total unemployed in the US "is just over half the nearly 30 million in job losses we expect to result from the spread of the coronavirus, which would be three times the number of job losses that occurred" during the last recession, Oxford Economics said, projecting the unemployment rate reaching 14 percent in April and 16 percent in May.
- Hitting the bottom? -
The US government has mobilized to stem the losses, with the Federal Reserve announcing on Thursday a new $2.3 trillion financing measure aimed at helping businesses, households and state and local governments facing a cash crunch.
Included in the measures is the Main Street Lending Program, which may purchase up to $600 billion in loans owed by small- and medium-sized firms "that were in good financial standing before the crisis," the Fed said in a statement.
Another program, the Municipal Liquidity Facility, will offer up to $500 billion in lending to states and municipalities by directly purchasing short-term debt.
The Fed also is backstopping the new Paycheck Protection Program launched last week as part of the massive $2.2 trillion rescue package the Congress approved late last month. The central bank will buy up all the loans issued by private banks worth up to the full $349 billion allocated to the program.
Powell acknowledged the US is facing a "truly rare" economic crisis, and unemployment is moving up at an "alarming speed," but the Fed is committed to using its emergency lending powers as long as the crisis lasts.
"There is every reason to believe that the economic rebound, when it comes, can be robust," Powell said in a speech.
Ian Shepherdson of Pantheon Macroeconomics said there are signs the initial jobless claims will decline in coming weeks.
"Google searches for 'file for unemployment' are now falling consistently on a week-on-week basis, by about one third," he wrote, forecasting a decline in claims next week to 4.5 million -- a number that would have been unthinkable a month ago before shops and businesses were forced to close their doors nationwide.
- More help needed -
IMF chief Kristalina Georgieva said the coronavirus pandemic could cause "the worst economic fallout since the Great Depression," turning global growth negative and requiring a massive governmental response.
Even in the best case, the IMF expects only a "partial recovery" next year, assuming the virus fades later in 2020, allowing normal business to resume as the lockdowns imposed to contain its spread are lifted.
In Washington, policymakers already are trying to bolster the $2.2 trillion emergency measures now being implemented.
The bill includes direct cash payments to Americans, expanded unemployment insurance and a $350 billion small business loan program, which has had a tumultuous rollout.
Banks have been frustrated by a lack of clear guidelines on how the measure works as they face a flood of requests for the cash.
Treasury Secretary Steven Mnuchin wants an additional $250 billion for these loans, but that will need to go through Republicans controlling the Senate and Democrats who lead the House of Representatives.
The Small Business Administration told AFP that as of Thursday morning there were more than 454,000 applications totaling nearly $118 billion, but it remained unclear how much had reached the borrowers.
April 09, 2020: The Federal Reserve on Thursday announced another series of financing facilities to provide $2.3 trillion to support the US economy amid the coronavirus pandemic.
The programs aim to help businesses, households and state and local governments facing a cash crunch as large parts of the economy have been shut down.
"The Fed's role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible," Federal Reserve Chair Jerome Powell said in a statement.
The measures include changes and increases to existing programs, as well as new facilities.
To "ensure credit flows to small and mid-sized businesses," the Fed opened a new Main Street Lending Program, to purchase up to $600 billion in loans owed by those firms, with the support of funding from the massive $2 trillion that Congress approved late last month.
According to the Fed, the program supports firms "that were in good financial standing before the crisis by offering 4-year loans to companies employing up to 10,000 workers or with revenues of less than $2.5 billion. Principal and interest payments will be deferred for one year."
Treasury Secretary Seven Mnuchin said the program "will make a significant difference for the 40,000 medium-sized businesses that employ 35 million Americans."
Treasury also is backing the new central bank program to "help state and local governments manage cash flow stresses caused by the coronavirus pandemic," the Fed said
This Municipal Liquidity Facility that will offer up to $500 billion in lending to states and municipalities, by directly purchasing short-term debt.