No.824 Impact of COVID-19 on Trade in Services
by Mitsuyo Ando and Kazunobu Hayakawa
In 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 disease 2019 (COVID-19) pandemic has restricted people’s cross-border mobility, which is fatal to the services trade because it often requires physical proximity between suppliers and consumers. We empirically examine 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 COVID-19 had a significantly negative impact on the services trade. Moreover, the extent of the impact varied among disaggregated services sectors, reflecting the nature of services. Travel services were the most affected, followed by transport services and construction services. The harmful effects on the trade in these services were more serious than those on the goods trade.
Keywords: Novel coronavirus disease 2019 (COVID-19), Trade in services, Balance of payments
JEL classification: F15, F53
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