Commonwealth countries are estimated to have lost up to $345 billion worth of trade in 2020, including $60 billion in intra-Commonwealth trade, the Commonwealth Trade Review said on Tuesday.
However, among developing nations only India in Asia recorded higher overall foreign direct investment (FDI) inflows in 2020 compared with this previous average.
The review, ‘Energising Commonwealth Trade in a Digital World: Paths to Recovery Post-COVID’, provides a timely and comprehensive analysis of the impact of the pandemic on the trade and investment flows of Commonwealth member countries.
The COVID-19 pandemic has taken a heavy toll globally, substantially impacting all Commonwealth members’ economies and leading to $1.15 trillion in foregone gross domestic product (GDP) in just one year.
Compared to pre-pandemic growth trends in 2020, Commonwealth economies contracted by approximately 10 per cent.
Most Commonwealth countries also experienced a significant decline in overall FDI inflows in 2020, with a loss of $153 billion to the Commonwealth.
Given the linkages between trade and investment and the role of FDI in supporting cross-border trade, these disruptions could limit trade prospects for Commonwealth countries.
Speaking ahead of the launch of the report, Commonwealth Secretary-General Patricia Scotland said: “Our member countries can harness the ‘Commonwealth advantage’ as a post-pandemic tailwind to accelerate recovery — especially small states, which have been particularly hard-hit.
“We know that trade can offer positive solutions to manage the pandemic and it is an essential factor for building back better. Commonwealth member countries can draw on the mutual support and benefits offered through initiatives such as our Connectivity Agenda, the Commonwealth Blue Charter, our Sustainable Energy Transition Agenda and other areas of our work and cooperation to help boost trade recovery in ways that are more inclusive, resilient and sustainable.”
A reassuring finding from the Trade Review is that the Commonwealth trade advantage has remained strong and resilient, and is now estimated at 21 per cent, on average.
On the investment side, this advantage has almost tripled since 2015, to around 27 per cent.
The economic fallout from COVID-19 varied across Commonwealth regions. The drop is higher for developing Commonwealth countries, where exports have contracted by approximately 10.1 per cent.
In absolute terms, Asian economies suffered the largest decline in exports (at $146 billion), followed by African ($20 billion), Caribbean ($4.2 billion) and Pacific members (1.3 billion).
However, relatively Caribbean Small Island Developing States (SIDS) underwent a greater slump. Their global exports shrank by almost 20 per cent. These SIDS largely rely on the exports of services, particularly travel and tourism, which were hit hard in this pandemic.
For FDI the drop affected all developed and developing countries but to a varying degree, with Australia and Rwanda notably experiencing a 50 per cent decline in inflows compared with the pre-pandemic (2017-2019) average.
Only eight Commonwealth developing countries recorded higher overall FDI inflows in 2020 compared with this previous average. They were The Gambia, Malawi and Sierra Leone in Africa, India in Asia, Belize, Guyana and Trinidad and Tobago among Caribbean SIDS and Papua New Guinea in the Pacific.
The pandemic’s disproportionate impact on already vulnerable economies, societies and healthcare systems exacerbates existing challenges to achieving the UN Sustainable Development Goals.
The changes brought about by the pandemic underline the centrality of technology to all aspects of our lives, from the rapid development of vaccines and 3D printing of medical equipment and devices to e-commerce and the online delivery of services.
Furthermore, the growth of investment in renewable energy is hugely encouraging as Commonwealth members aspire to greener, more regenerative development.
Looking forward, intra-Commonwealth exports are expected to rebound and surpass $700 billion by 2022. However, FDI inflows to the Commonwealth are expected to decline by 18 per cent in 2021, and a further seven per cent in 2022. As a result, the total value of FDI inflows to the Commonwealth is expected to decline to $136 billion in 2022, or a loss of around $220 billion compared with 2019.
While there are still many challenges ahead, the 2021 Commonwealth Trade Review identifies possible pathways to help guide Commonwealth policymakers and businesses towards a more inclusive, sustainable and resilient recovery, especially through digital trade and technologies.