Credit and caution predicts that the economic scarring of the pandemic will cause a permanent loss of production and structural changes in international trade supply chains. This follows from the last report released by credit insurer on Asia that prevents the saving of households and companies and the fiscal consolidation of public spending. “Around the world, government action has limited the erosion of employee skills and the dismantling of companies. This has been crucial for the economy’s supply to remain more or less intact, and to avoid a situation in which repressed demand in the recovery cannot be satisfied by supply. But cThe longer the pandemic lasts, and the greater its impact, the more scars there will be”Says the report.
The expected degree of healing varies depending on the structure of the economies and the magnitude of the fiscal and monetary response. and it will be lower in advanced economies than in emerging ones, with low incomes or dependent on tourism. Asia will be particularly affected by this situation. Although the region will show strong growth in the coming years, from 5% to 6% annually, the negative impact of Covid-19 will be long-lasting in most of your markets. In 2025, its GDP will be 3% lower than expected before the pandemic. Indian, Filipino and Indonesian It will be the Asian countries where the pandemic will have the greatest permanent effects.
Logistical shortages have led Public Administrations around the world to put more emphasis on self-sufficiency in strategic sectors such as high technology or pharmaceuticals. The pandemic has also sensitized companies to the vulnerability of their supply chains and many are being redesigned to mitigate the risks of future external shocks sacrificing part of your profitability. East trade-off of efficiency for resilience will have a impact on foreign trade, since the new strategies imply a greater dependence on the supply of basic products and intermediate goods from nearby countries or regions. Predictably, the pandemic reinforce the trend towards relocation which began during the trade war between the United States and China.
The last three decades of globalization have facilitated geographic diversification of supply chains outside national markets. Improved technology and innovations have boosted logistics, while investment liberalization and free trade agreements have lowered barriers between countries. From an economic point of view, these advances have been beneficial, since international trade facilitates the use of the competitive advantages of the different markets to produce a certain good or service at a lower opportunity cost. TOsia, being at the center of the evolution of the global supply chain, has benefited enormously in recent decades of the increase in international trade but the trade war between the United States and China and their geopolitical rivalry seem to have ended this trend.
With the current North American Administration trade policy has become less volatile, but both tariffs and non-tariff barriers are maintained. However, the complete decoupling of the world’s two largest economies seems unthinkable. The United States and China are strongly interconnected and to separate completely would greatly harm both countries and world trade. In the meantime, the European Union has become more critical of China’s ambiguous trade policies and practices which, on the one hand, focus on innovation and market reform and, on the other, on self-reliance and national security. Predictably, China will continue to curb foreign investment and force foreign companies to trade market access for its technology.
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