IFC - Taking Action on Trade: From Concern to Support

21 January 2021 |
  • Across countries, many measures have been taken to contain the spread of COVID-19. In addition to social distancing measures, travel bans, and movement restrictions, many countries have adopted trade restrictions and/or monitoring, either to protect their citizens from shortages or to avoid infection through imported products. The combined effect of the pandemic and protective measures has been a decrease in year-on-year world trade merchandise value in the first half of 2020. In the third quarter, despite a partial recovery in world merchandise trade value, trade had yet to return to its pre-pandemic level.
  • Of all new trade restrictions put in place in reaction to the COVID-19 crisis in 2020, approximately 61 percent are still active, and several touch essential products. These products include protective equipment (masks, gloves, and goggles), medicine, medical equipment (ventilators and respirators), COVID-19 test kits, and food, among others.
  • In the short term, trade restrictions can exacerbate existing trade contractions and shortages. As a result, some countries have expressed concern about potential shortages of food and medical products. This is especially true as the world's top exporters of medical products have been directly affected by COVID-19, which has disrupted global medical supply chains, especially in import-dependent countries. Trade restrictions can also have structural effects on longer-term economic growth and can slow post-pandemic recovery.
  • Consequently, many multilateral development banks and other institutions have called on countries and other stakeholders to continue to support trade, despite current challenges. Many have also pledged to collaborate in order to support a number of stakeholders facing difficulties, including banks, companies, and small and medium enterprises.
  • Financial institutions play an important role in supporting trade, particularly in emerging market and developing economies (EMDEs). They can collectively provide on-the-ground market intelligence regarding the effects of COVID-19 on their customers. This note summarizes a small part of their input, adding their unique voices to other information on what is needed most—and most urgently—to support trade. IFC’s forthcoming publication “COVID-19 and Other Challenges for Trade Finance in EMDEs: An overview of IFC’s Annual Issuing Bank Survey,” will identify the most important and urgent needs articulated by EMDE banks.

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