Insight and Analysis

Looking Ahead: MODIFI's Global Trade Predictions for 2021

After an eventful year for global trade in 2020, many wonder what 2021 has in store. Despite the drawbacks of the pandemic, businesses around the world displayed incredible resiliency in overcoming these challenges. Adapting to virtual interactions, solving supply chain disruptions, and adopting digital financing solutions are some of the ways companies accelerated their recoveries during an unprecedented recession.

According to the World Bank Outlook, global economic activity is predicted to expand 4% in 2021 but remain 5% below pre-pandemic levels. To normalize international trade transactions, buyers and suppliers are increasingly adopting technology platforms and advanced planning techniques that ensure their recoveries are on-track.

Should We Expect More of 2020 in 2021?

In 2020, some industries suffered harder blows than others following the health crisis. While the tourism, airline, and retail industries experienced the most losses, the e-commerce, medical, pharmaceutical, technology, and shipping sectors became more profitable.

The progress of worldwide economic recovery is mainly dependent on the successful deployment of vaccines and countries' abilities to minimize the virus's spread. From March onward, PwC predicts an increase in trade growth following the vaccination of a significant portion of populations in advanced economies.

Global Trade Bounces Back

The World Economic Forum has discussed the possibility of a "Great Rebound" in global trade in 2021. These projections indicate that a recovery will be unevenly distributed, with some nations, such as China, expecting to recover faster than countries like France, Germany, Spain, and the UK, where the primary export focus is on capital goods.

However, economists are cautiously optimistic since any positive growth could halt if a subsequent wave of the virus results in renewed lock down measures. If containment measures continue to be effective, the World Trade Organization (WTO) predicts 5% GDP growth in 2021. Meanwhile, Morgen Stanley projects global GDP growth up to 6.4%.

Emerging Markets will play a pivotal role in economic recovery and setting the pace for growth. For example, Brazil and India have exceeded pre-pandemic growth rates, and other countries, such as Taiwan and Korea, are well underway with their recoveries.

Demand for Shipping Containers Through The Roof

The boom of the global shipping container industry is projected to continue throughout 2021 and beyond. Current statistics suggest that the market will grow from $8 billion to $11 billion over the next four years. A staggering 8% compound growth rate is possible due to an increase in favorable trade agreements worldwide.

At the same time, the heightened demand for containers is causing shipping rates to soar. Now, containers that would have cost $2,000 last spring are quoting up to $13,000 this February. The price increases are significantly impacting the textile, automotive, and manufacturing industries.

Another consequence of container shortages has resulted in many warehouses reaching full capacity. This January, dozens of ships were anchored offshore near a port in Los Angeles, waiting to unload their cargo, since every warehouse within a 60-mile radius was full, resulting in massive delays. A shortage of dock workers further complicated the situation.

If you want to know more about the current logistics challenges, our partners at Twill have written a handy guide to help you avoid disruption.

SMEs Overcome Trade Challenges

More than one-third of shipping containers arriving in one of the world's largest ports are late. In many instances, supply chain weaknesses are to blame. The unprecedented surge in demand for merchandise from China idled vessels and challenges keeping up with demand continue into 2021.

These supply chain disruptions often have negative rippling impacts on a company's financials. One way to avoid these complications is with digital trade finance, which helps remedy immediate cash flow issues and optimize balance sheets.

Small and Mid-sized Enterprises (SMEs) face a unique set of challenges overcoming last year's global trade events. Despite representing the backbone of world trade, SMEs in many countries worldwide had more difficulty securing cash than larger corporations.

Technology platforms and digital trade finance solutions help SMEs overcome their challenges by promoting transparency and streamlining payment processes. By digitizing business operations that were traditionally paper-based, micro-enterprises and SMEs are discovering new growth opportunities.

Access to external financial support systems also enables SMEs to better withstand the duration and scale of a global financial crisis. One option is supply chain financing, which can strengthen international supplier networks and optimize internal payment structures necessary to keep production moving at a consistent pace.

Top 2021 Global Trade Predictions

The year 2021 will be another eventful year for global trade, as distributors, manufacturers, buyers, and suppliers strive to keep up with consumer demand.

  • Global trade is on the rebound and predicted to stay on schedule assuming virus cases subside.
  • Global GDP growth could reach 6.4% in 2021.
  • Emerging markets and SMEs are propelling trade recovery.
  • Overcoming supply chain weaknesses will play an essential role in solving the shipping container shortages.

Digital trade finance is helping buyers and suppliers optimize their working capital.

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