The post-pandemic trade recovery fell just a little short of the average of past global recessions. In 2021 as a whole, goods trade stood at 6 percent above its pre-pandemic level, which compares with 8 percent in the first year of recovery after the average past global recession. The recovery in global trade since 2020 partly reflected a shift in global demand toward trade-intensive manufactured goods—especially durable goods—and away from services, which tend to be non-tradable. The increase in industrial production has been mirrored almost one for one by trade growth. This is consistent with both being lifted by a common factor such as a rebound in global demand (World Bank 2022a). The recovery in goods trade has been fairly broad-based, with global imports of cars, capital goods, consumer goods, and industrial supplies all back at or above pre-pandemic levels by January 2021 (IMF 2021). However, global goods trade stalled in the second half of 2021, amid slowing demand growth and supply bottlenecks. It was dealt a further blow in February 2022 by Russia’s invasion of Ukraine, which has disrupted trade flows from the Black Sea and especially curtailed trade in commodities.

Through most of 2021, global services trade remained below pre-pandemic levels, in contrast with earlier global recessions when it typically recovered quite rapidly. Aggregate services trade only reached pre-pandemic levels in September 2021. By January 2022, most components of services trade, including telecommunications and financial services, had fully recovered to pre-pandemic levels, but travel services remained 40 percent lower. Travel and tourism trade recovered to pre-pandemic levels only by July 2022. The recovery in services trade was fastest in East Asia and the Pacific (EAP), where China’s services trade had already returned to pre-pandemic levels by December 2020. Services trade, including travel and tourism, has played an increasingly important role in the global economy. For example, since 2000, global travel and tourism revenues have nearly tripled, with the sector in 2021 accounting for 10 percent of global GDP, 30 percent of global services trade, and 10 percent of all jobs worldwide (World Bank 2020b).

Spillovers through global value chains are likely to have amplified the fall in world trade associated with the COVID-19 pandemic (Cigna, Gunnella, and Quaglietti 2022). Companies increasingly turned to digital technologies and diversified suppliers and production sites to mitigate disruptions caused by the pandemic (Saurav et al. 2020). In 2021, strains in global supply chains worsened significantly. The rapid recovery in global goods consumption from mid-2020 put acute pressure on the trade-intensive manufacturing sector. At the same time, COVID-19 outbreaks continued to disrupt production at many points along complex global value chains, creating significant obstacles to final goods production. COVID-19 outbreaks have also shut down some key port facilities, disrupting ocean shipping and air freight and leading to an unprecedented lengthening of supplier delivery times (figure 4). Regression analysis that controls for the effect of demand conditions suggests that global trade could have been 3.5 percent higher in 2021 had it not been for supply chain strains (figure 4).<sup>5</sup> In 2022, these supply 5 The impact of supply bottlenecks is estimated in an ordinary least squares regression of global trade on the manufacturing PMI for new export orders, the manufacturing PMI for supplier delivery times (a