The Covid-19 pandemic has had a devastating impact on the global economy. It has changed how companies operate, causing many to freeze their activities and shut their doors. Local, regional and international organisations have all had to adapt.
So how do businesses get back on their feet? And what is the best way to achieve sustainable, post-pandemic economic growth?
The volume of global merchandise trade fell dramatically in 2020. The World Trade Organisation estimated that world trade would fall between 13% and 32% in 2020 as the Covid-19 pandemic ‘disrupted normal economic activity and life around the world.’
While the decline might not be as high as some predicted, there are still concerns.
Trade tensions in 2019 contributed to a global economic slowdown in the global economy in 2020, with lower levels of trading activity in sectors and products affected by these tensions.
In its 2020 report, the WTO stated that:
‘In 2019, even before the pandemic, world merchandise trade declined in volume terms by 0.1%, weighed down by political tensions and protectionist measures. In value terms, which reflect commodity price fluctuations, merchandise trade fell by 3%. For comparison, merchandise trade volumes grew by 2.9% in 2018’.
However, there is cause for hope. The WTO estimates that world merchandise trade volumes will increase by 8.0% in 2021 after falling 5.3% in 2020.
But it is important to remain realistic and prepare for further harsh times. Indeed, the WTO states that:
‘The relatively positive short-term outlook for global trade is marred by regional disparities, continued weakness in services trade, and lagging vaccination timetables, particularly in poor countries.’
World economies will continue to experience economic struggles for some time. So how can we achieve a stable and reliable economy in a post-pandemic world?
Many global organisations, institutions and other bodies recognise the need to boost operations and contribute effectively to modern international trade.
The WTO announced that the Finnish government is contributing over €1 million (EUR) in 2021 and 2022 to:
Donations will help LDCs to comply with international food safety, animal and plant health standards to promote safe trade. The goal is to encourage those countries to be more active in international trade. The other aim is to finance training for officials from countries that need technical help to enhance their trading capacity.
Some regions will find it easier to recover from the pandemic than others. For example, much of the global import demand will be met by Asia, with exports expected to grow by 8.4%. Meanwhile, South America will see weaker export growth (3.2%) in 2021.
Covid-19 had a minimal impact on some Asian economies. This can explain the region's rapid post-pandemic recovery.
Asia has been supplying consumer goods and medical supplies to many countries during the pandemic. This has driven regional export totals and ensured its economy could grow.
Small and medium-sized enterprises (SMEs) need consistent cash flow when trading internationally. Cash flow is especially crucial for Exporters in developing markets.
SMEs exporting goods overseas typically have to wait 60-120 days for payment. This waiting period is long and can cause cash flow problems. This is where invoice financing (otherwise known as invoice factoring) can help.
Invoice financing companies offer immediate coverage of invoice debt by advancing cash to the Exporter. The financier then collects the invoice payment from the Importer on the due date.
This results in the Supplier receiving the funds as soon as the goods are shipped (usually within 48 hours). Furthermore, non-recourse invoice financing protects the Exporters from non-payment because the financier shoulders that risk.
Invoice finance is a reliable way for a company to avoid becoming financially vulnerable. This is especially important now as businesses try to get back on the road to recovery following the pandemic.
These programmes are supported by a pool of world-known investors with a reserve of $500 million (USD) each. The aim is to help companies unfreeze working capital and avoid deferred payments with pending invoices.
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