The Impact of Coronavirus -$1 trillion worth lost on international trade
The novel coronavirus has claimed more than 40,000 lives around the world, and there are more than 850,000 identified cases. This pandemic has already had a major impact on companies and traders around the world. Key contracts are being lost, tariffs are being re-negotiated, and compliance has become even more important.
Traders need to be aware of the ways in which this pandemic is having an impact on the international business community. Being aware of these developments could help traders in taking the necessary steps to neutralize the risks and chalk out effective strategies. This blog focuses on discussing the impact of the novel coronavirus on the global trade finance industry.
Impact on Trade Finance
According to estimates, up to $1 trillion worth on international trade may be lost due to this pandemic. These losses could arise due to countries being under lockdown, flights being cancelled, and businesses being shut down permanently. Demand for key resources such as oil is down by as much as 20%, having a huge impact on international trade.
The United Nations Conference on Trade and Development (UNCTAD) has estimated that there could be major losses for exporters around the world in the upcoming months.
According to the initial estimates, the international trade figures could decline by as much as $50 billion. The sectors that are likely to be the most affected include precision instruments, automotive and communication equipment, and machinery.
The countries that will suffer the most damage due to the virus include the EU, the US, Japan, China, Korea, and Vietnam. China is widely considered to be a hub of global trade, due to its strong manufacturing sector.
However, China’s manufacturing capabilities are also suffering due to the spread of this pandemic. The UN has estimated that China’s manufacturing indices are likely to decline by almost 25%.
China is also mobilizing its resources towards its healthcare sector. This is being done in order to deal with the crisis. As the country’s strategic priorities shift, exporters that are engaged in doing business with them will continue to face challenges.
Impact on India
According to the United Nations, the cumulative impact of the virus on the Indian trade industry could be as high as $348 million.
Indian traders are already suffering major losses because of the lower demand from overseas markets. This situation is likely to worsen over the next few months, as the virus continues to spread to all parts of the world.
The United Nations has also predicted that India will be among the top 15 hardest-hit economies in terms of international trade volumes.
The key sectors that will suffer in India include chemicals, textiles, apparel, and automotive. In addition to these, sectors such as electrical machinery, leather, wood, and metals are also likely to face the heat. The Indian trade industry was already suffering from a slowdown even before the spreading of the pandemic. This new challenge could prove to be unbearable for several exporters in the country.
Indian trade authorities will have to alter their strategy in order to deal with this threat. One possible measure could be to make sure that credit flow improves.
In order to combat the threat of the coronavirus and to make their trades more secure, traders can seek help from external institutions. Institutions such as Euro Exim Bank, offer extensive trade support in the form of financial instruments as well as customized trade advisory services. Euro Exim Bank offers instruments like Bank Guarantees and Letters of Credit (LCs). Further information about Euro Exim Bank and its key product offerings is available here.