The note finds that decreasing demand in key markets, declining commodity prices, and declining remittances have contributed to a decline in export earnings for LDCs.
The publication warns that the pandemic has the potential to reverse LDCs’ development gains and negatively affect countries’ prospects for graduation.
The World Trade Organization (WTO) Secretariat published an information note that examines the effect of the COVID-19 pandemic on least developed countries’ (LDC) participation in global trade. The note highlights a “significant decline in export earnings” among LDCs since the outbreak of COVID-19, and calls for supporting LDCs’ participation in global trade through providing debt relief and strengthening social sectors.
The note titled, ‘The COVID-10 Pandemic and Trade-related Developments in LDCs,’ finds that decreasing demand in key markets, declining commodity prices, and declining remittances have contributed to a decline in export earnings for LDCs. LDCs’ dependence on a limited range of products exported to few markets has compounded economic challenges, particularly in the textile and clothing product markets and countries dependent on tourism revenue. As an example, the number of tourists visiting Tanzania’s Serengeti fell from 6,000 per day to 24 following COVID-19. Overall, the note states, the 2020 downturn in trade is “likely to be even more severe for LDCs” than at the global level. The note warns that the pandemic has the potential to reverse LDCs’ development gains.
The number of tourists visiting Tanzania’s Serengeti fell from 6,000 per day to 24 following COVID-19.
There are currently 47 LDCs, 36 of which are WTO members and 12 of which are at different stages of the graduation process. The note finds, however, that the pandemic has the potential to negatively affect countries prospects for graduation. Angola and Vanuatu, which are scheduled to graduate, and Bangladesh, which is on the path to graduate in the next few years, have experienced “massive falls” in their export earnings and decreased remittances, which are likely to negatively impact their graduation prospects in the near term.
LDCs are addressing the COVID-19 pandemic through various measures such as providing stimulus packages to export-oriented sectors, strengthening health care systems, and providing liquidity support to small and medium-sized enterprises (SMEs). For example, Myanmar established a COVID-19 fund worth over USD 70 million to provide loans at one percent interest rate to SMEs, Lesotho has exempted businesses from a variety of taxes, including value-added tax (VAT), and Rwanda has expedited VAT refunds to SMEs. The WTO LDCs group has also called on other WTO members to refrain from imposing restrictions on medical goods and food and from imposing export prohibitions. Some LDCs have decreased duties on medical goods to provide them at more affordable prices for their citizens.
The note summarizes international responses and support for LDCs, including emergency funding to fight the pandemic from international financial institutions (IFIs). The publication concludes that maintaining support measures for LDCs, including providing social safety nets for the most vulnerable and redoubling coordination efforts, is critical to economic recovery. [Publication: The COVID-10 Pandemic and Trade-Related Developments in LDCs] [WTO Press Release] [SDG Knowledge Hub Story on Trade Impact on LDC Graduation]