Impact of COVID-19 on trade in services

During past shocks (e.g., the 2008-2009 global financial crisis), the services trade was found to be more resilient than the goods trade; however, the ongoing novel coronavirus (COVID-19) pandemic has restricted cross-border mobility, which is disastrous to the services trade because it often requires physical proximity between suppliers and consumers. We empirically examined the impact of COVID-19 on the services trade using quarterly data from 146 countries in 2019 and 2020. Its severity is measured according to the number of cases, the number of deaths, and an index measuring the severity of lockdown orders. We found that the pandemic had a more significantly negative impact on the services trade than the goods trade, particularly on the import side. Moreover, the extent of the impact varied among disaggregated services sectors, reflecting the nature of services. Travel services were the most severely affected, followed by transport and construction services, which are largely related to the international movement of people and goods. On the other hand, other services typically provided as cross-border supply, including computer services, experienced almost no significant effect.