The COVID-19 pandemic prompted governments around the world to implement significant restrictions on mobility (Chart). This caused severe demand destruction and disruption to global supply chains in the first half of the year. At the aggregate level, both advanced and emerging economies fell into recession for the first time since World War II. A slump in domestic demand caused China’s GDP to contract 6.8% year-over-year in Q1—the first annual decline in four decades. COVID-19 exacerbated existing economic vulnerabilities in India and Sri Lanka and prompted a downturn in the previously fast-growing Philippines economy. India, Spain and the UK, among many other countries, suffered their largest GDP declines on record.
Global merchandise trade sank in the first half of 2020. Falling commodity prices, particularly energy prices, reduced export receipts across the world’s mining and energy producers. International travel restrictions disproportionately hurt services trade, such as tourism and education. Tourism-dependent Pacific Islands and Southeast Asian markets were hit particularly hard. Rising unemployment heightened consumers’ caution and weighed on demand for consumer goods.