As Covid-19 disrupts societies and economies, demand for trade finance remains strong. Banks can support their corporate and financial institution clients throughout this turbulent time through the with the use of low-credit risk products and strong client relationships, explains Deutsche Bank’s Russell Brown
Global trade flows – the driving force of the real economy – have seen impressive growth since 2000, almost trebling to reach US$18.1trn in 2019.1 Since the beginning of the year, however, the industry has been heavily impacted by the global response to Covid-19, with national lockdowns significantly hindering the pace of activities. As a result, the World Trade Organisation expects global trade to fall anywhere between 13% and 32% in 2020.2
While the crisis resulting from the pandemic inevitably affects trade volumes, corporates and financial institutions still require access to trade finance to ensure adequate risk mitigation and liquidity – perhaps even more so in the face of higher macroeconomic and geopolitical uncertainty. Banks must be prepared to support them with such requests. The low-credit risk profile of trade finance products ensures that this remains an attractive proposition for all parties involved, as confirmed by the International Chamber of Commerce’s (ICC) Trade Register.