The value of global services trade is expected to increase by about two trillion dollars over the next five years, from 6.1 trillion dollars in 2019 to eight trillion dollars in 2025, equivalent to an increase of nearly a third (31 percent) of the value of global flows during this period.
The United States, France and Britain - among the developed economies - are also expected to witness the largest increase in the value of international trade in services by 2025, in addition to seven other economies, including Saudi Arabia, that will achieve strong growth.
This came in an expanded report issued yesterday by Western Union, a global company in the field of cross-border cash transfers and multi-currency payments, entitled "Global Services Trade Revolutions: Fueling Economic Recovery and Growth in the Post-Pandemic Period," in partnership with Oxford Economics Ltd, which specializes in the field of global forecasting and quantitative analysis.
It is also estimated that large-scale multilateral liberalization of trade policies could lead to a further 11 per cent increase in the value of world trade in services in circulation worldwide by 2025, equivalent to an increase of $890 billion in the value of such cross-border transactions.
The two institutions suggested that this growth would accelerate with the adoption of new techniques and the digitizing of work practices, imposed by the Covid-19 epidemic, and that changing online interactions would stimulate economic recovery and the growth of cross-border trade in post-epidemic services over the next five years.
While the central forecasting vision of Western Union and Oxford Economics Ltd envisages a relatively strong economic recovery, a more pessimistic outlook, characterized by a more pronounced short-term contraction and a long and partial recovery, is also possible. However, the pessimistic view will only amplify the relative superior performance of digital services.
Frederic Simon, Vice President of Europe at Western Union Business Solutions, said, "The real value of the global service sector has been undervalued and diminished for a very long time. That needs to change now."
He added, "The economic impact of Covid-19 will be felt for years to come, but we clearly see that regions and industries that recognize and value global services will be in a better position to ensure their success and ultimately their recovery in the future."
The analysis indicated that although the global economy is suffering in the short term, trade in digital services will be relatively resilient during the current crisis.
It is estimated that the value of cross-border B2B service flows between businesses in terms of value added, information technology, communications and financial services will decrease only 6 percent in 2020, compared to the value of merchandise trade, which is expected to decrease by about 13 percent.
At the same time, groups severely affected by traditional services, such as tourism, will decrease by about 40 percent in 2020, and commercial air transport by more than 50 percent. As a percentage of total services trade, these two categories are expected to decline to 39 percent in 2025, from 41 percent in 2019.
Geographical distribution
The report analyzed these trends in eight major advanced economies, and concluded that B2B services will be the main engine for export growth, with financial services also being important to major centers such as the United States, Britain, Hong Kong, and Singapore. In addition to this sample, Western Union also forecasts growth in digital services exports in the medium term in South Korea, Japan, Australia, New Zealand, and Saudi Arabia.
According to "Western Union" the United States will witness the largest overall increase in services exports during the forecast period, due to its global leadership in several categories of professional services, as well as its investments in digital infrastructure and technical innovation.
Western Union added that the Covid-19epidemic has already led to a tenfold increase in the growth of digital services. She highlighted the potential for remote services to cross international borders. And that the world will witness, during the next decade, the emergence of a set of new business models that redefine opportunities for cross-border transactions.
In the short term, WU explained, global trade in services will be an essential part of the recovery, with digitally oriented industries as the driving force.
The report estimates the share of services currently at more than half (55 percent) of all global trade flows, which accounted for $ 13.7 trillion in cross-border transactions in 2019, while official statistics indicate that the share of services in total trade reached 24 percent in 2019. Versus 19 percent in 1995.
Frederic Simon concluded, "The aim is to support industries that drive economic growth and recovery, and to provide support to drive growth in the digital services sector."
