Swedish exports to East Asia set to recover

While the continued spread of Covid-19 remains a serious issue in several parts of the world, some regions are more successful than others in reducing the spread, as reflected in that the number of new, confirmed cases has levelled off.

The economic consequences of lockdown have resulted in falling GDP in most countries, even if the size of the drop varies substantially. A drop of less than 10 percent – such as reported in all Nordic countries – may in this context be regarded as a relative success, notes Stefan Karlsson, Chief Analyst at EKN. “The ongoing economic recovery seen in many parts of the world renders the most pessimistic scenario on the world trade in goods published by WTO in April less likely to eventuate,” he says and adds: “It is rather the optimistic scenario predicting a ‘mere’ 13 percent drop in world trade for 2020 that looks set to happen.”

The Swedish export is still suffering from the global pandemic, but a recovery is in the cards, says Karlsson: “In May, Sweden’s exports fell by over 25 percent compared to May last year, while June saw a fall of merely 2.5 percent, followed by a 15-percent fall in July.” The sharp drop, however, fall should be treated with caution, he adds, since the numbers for July last year was exceptionally strong.

Which Swedish export markets are doing particularly well in comparison?

“Exports to North America, Middle East and Asia – particularly China, Thailand, Japan and Taiwan. Exports to the EU, on the other hand, have fallen some 10 percent but the economic recovery underway in several of Sweden’s major export markets will serve to dampen the predicted fall in exports.”

Looking ahead, what is your opinion on the economic outlook?

“Even if some countries report a renewed rise in the number of Covid-19 cases, the sort of complete lockdown measures implemented earlier this year is hardly likely to return, since their negative consequences for the economy in general proved too adverse. In addition, the ability to tackle local outbreaks have improved and we also have a clearer idea on which individuals belong to high-risk groups and how they should be protected.”

What is your view on the development in Asia?

“China’s economic recovery looks set to continue, and the number of new confirmed cases remains low. Given the country’s extraordinary capacity for testing and monitoring, the authorities appear well equipped to curtail new outbreak clusters. The GDP growth in China on a rolling 12-month basis is back in black and several international banks have upped their GDP growth estimates for 2020, to around 2.5 percent.

“In the rest of Asia, however, growth forecasts have been revised downwards, following prolonged domestic restriction in May and June, leading in turn to reduced exports, tourism and remittance earnings. In countries like India, Philippines, Indonesia and Bangladesh the spread of virus is still not under control. The development in India, which passed the US and Brazil in terms of new, confirmed cases in August, is particularly worrying.