WTO: World trade in commercial services shows signs of resilience

Services trade fell 4.3% in June quarter, lower than anticipated

Despite losing momentum, global trade in commercial services is showing signs of resilience and has fared better than merchandise trade, the World Trade Organization (WTO) has said. While services trade fell 4.3 per cent in the June quarter of calendar 2020, the decline was smaller than the WTO had feared.

The global body’s Services Trade Barometer (STB) showed a reading of 95.6 on Thursday. Readings of 100 indicate growth in-line with medium-term trends, while readings greater than and below 100 indicate abovetrend and below-trend growth, respectively. The barometer, launched exactly a year back, is part of the WTO’S efforts to develop new insights into services trade and is released twice annually.

"While substantial, this decline is smaller than those seen during the financial crisis over a decade ago, when services trade fell by 5.1 per

cent in the first quarter of 2009 compared to the previous year before registering an even bigger 8.9 per cent slump in the second quarter," the WTO said.

Services trade has generally held up better-thangoods trade since the latter is

directly affected by geopolitical tensions. Services trade growth had been slowing in the second half of 2019, and the recent contraction in services trade reflects a weakening pace of global economic growth as well as the early stages of the Covid-19 pandemic. While the index is expected to remain below trend into the second half of the year, a recovery in passenger air transport would make a powerful contribution to a turnaround.

Declines in most of the component indices drove the June quarter softening, but some components did show signs of bottoming out. Passenger air travel index (49.2) has been the hardest hit, with the biggest decline recorded for any of the barometer's components. However, the contraction appears to have stabilised recently.

Indices representing container shipping (92.4), construction (97.3), and the global services Purchasing Managers' Index (97) showed signs of revival.

Interestingly, the information and communication technologies services index tumbled to 94.6, despite robust demand during the pandemic. The financial services index (100.3) was the sole component index that remained on trend as of midseptember.