- Reports of the demise of globalization caused by COVID-19 have proved premature, the global connectedness report says.
- Global trade in goods has surged to pre-pandemic levels, despite supply chain problems.
- But many countries are experiencing high inflation rates and developing countries are struggling to recover, with limited access to vaccines.
COVID-19 has not undermined globalization as much as some had predicted. While travel and tourism have been hit hard, international trade has soared during the pandemic, according to a new study on global connectedness.
Trade, capital flows and global internet traffic are back at or even above pre-pandemic levels. COVID-19 also brought about a temporary ceasefire in international trade wars, with the United States and China, for example, trading more than before during the pandemic.
These are some of the findings of the DHL Global Connectedness 2021 Index Update, co-authored by Dr. Steven A. Altman and Caroline R. Bastian, both research scientists at New York University’s Stern School of Business. The study uses 3.5 million data points to map the health of globalization by measuring international trade flows, capital, information and people.
The data to date suggests that COVID-19 has had a much smaller impact on globalization than the 2008-09 global financial crisis, with levels of connectedness set to reach an all-time high in 2021, the report said.
“As 2021 draws to a close, globalization appears much stronger than in the early stages of the COVID-19 crisis,” said Dr Altman.
“The rapid recovery in trade and other flows shows how international connections are enhancing our ability to meet challenges,” he adds.
“Most flows plummeted as the pandemic shook the world, but many have also come back to play a pivotal role in the fight against the virus and in economic recovery.”
A wave of trade
In particular, trade in commodities has surged above pre-pandemic levels as the recovery gains momentum. This is despite supply chain problems caused by a shortage of containers and the ships to carry them and ongoing international tensions, the report said.
Some experts predicted that the pandemic would push companies to source from their local region rather than globally. But according to the report, international flows of goods are growing faster than flows within regions.
Capital flows have also exceeded expectations. Based on data from the United Nations Conference on Trade and Development (UNCTAD), the report says the pace of foreign direct investment is on track to reach pre-pandemic levels by 2021.
This is despite falling more than a third (35%) in 2020 as companies postponed foreign investment decisions due to economic uncertainty, deteriorating macroeconomic conditions and restrictions on business travel.
The global COVID-19 pandemic continues to disrupt manufacturing and supply chains, with serious consequences for society, businesses, consumers and the global economy.
As the effects of the coronavirus unfold, companies are wondering what short-term actions to take to ensure business continuity and protect their employees. How should they prepare for the upswing and increase the resilience of their manufacturing and supply systems?
The World Economic Forum, in partnership with Kearney, brought together senior executives from various industry sectors to identify the best response to the COVID-19 crisis. Their recommendations have been published in a new white paper: How to recover stronger from COVID-19: Resilience in manufacturing and delivery systems.
Read the full whitepaper and more information in our Impact Story.
Companies are invited to join the Forum’s Platform for Shaping the Future of Advanced Manufacturing and Production. The platform’s work allows companies to collaborate with other leaders to find solutions that support the reconfiguration of global value chains after COVID-19.
Growth rates for international internet traffic may have doubled by 2020, with people connecting digitally rather than face-to-face, but have declined as the recovery progressed. This is in line with the general slowing trend seen before the pandemic, the report said.
However, the value of global trade in services fell by a fifth in 2020, almost entirely due to the collapse of travel and tourism, the report explains. In the fourth quarter of 2021, international travel is still more than 80% below pre-pandemic levels.
A mixed regional picture
While there has been “no large-scale withdrawal from international activity,” the recovery situation varies significantly from region to region, the report’s authors say.
“Strengthening the foundations of a connected world and better integrating the world’s poorest countries should be urgent priorities in the current context.
“Most countries remain well below their pre-pandemic growth trajectories, and many are experiencing high inflation.
“Stronger global connectivity could help countries grow faster and ease some of the pressure on price levels. Ultimately, a connected world – leveraging the different strengths each country can bring to the table – offers the best prospects for a strong and sustainable recovery.”
The World Economic Forum’s November 2021 Chief Economists Outlook warned that the emergence of new strains of COVID-19 could derail the global recovery and also warned policymakers to beware of the dangers of rising inflation.
The Forum’s briefing highlighted the vaccine gap as a major cause of developing countries’ economic underperformance. It noted that only 3.7% of the population in low-income countries had received at least one dose, compared to 61% of people in high-income countries.