- Forecasts by Western Union and Oxford Economics project the
value of international, cross-border trade in services rising from
$6.1trn in 2019 to $8.0trn by 2025 – a 31% increase in
value
- Amongst developed economies, USA, France, and UK set to see
largest increase in value of cross-border trade in services by
2025
- Adoption of new technology and digitization of working
practices likely to further fuel post-pandemic economic recovery
and growth of cross-border trade in services
- Trade policy liberalization could see an additional $890bn
increase in the value of services traded globally
The Western Union Company (NYSE: WU), a leader in cross-border,
cross-currency money movement and payments, today launches a new
report, “The Global Services Trade Revolutions: Fuelling
post-pandemic economic recovery and growth,” in partnership with
Oxford Economics – a leader in global forecasting and quantitative
analysis.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20200811005332/en/
Comparison of global services export
forecasts (Graphic: Business Wire)
The report projects the value of international trade in
services* rising from $6.1trn in 2019 to $8.0trn by 2025, equating
to an increase of almost a third (31%) in the value of global flows
over this period.
It is predicted this growth will be accelerated by the adoption
of new technology and digitization of working practices forced by
the onset of the COVID-19 pandemic – which, combined with a shift
in attitudes to online interactions, is likely to fuel economic
recovery and growth of cross-border trade in services in the coming
five years.
Western Union Business Solutions and Oxford Economics’ central
forecast scenario envisages a relatively strong economic recovery,
but it is also possible that a more pessimistic scenario will
unfold, characterized by a steeper near-term contraction and a more
prolonged and incomplete recovery (see Comparison of global
services export forecasts graph). Still, this scenario would only
magnify the relative outperformance of digitally-deliverable
services.
“For far too long the global service industry has been
undervalued and its importance underestimated. This report shows
that this needs to change. The economic impact of COVID-19 will be
felt for years to come, but we can clearly see that the regions and
industries that recognize and appreciate the value of global
services will be in a better position to drive future success and
ultimately, recovery,” said Andrew Summerill, President, Payments
at Western Union.
Sector breakdown
The analysis suggests while the global economy is suffering in
the short-term, trade in modern digital services will prove
comparatively resilient through the current crisis. It estimates
that the value of cross-border flows of B2B, ICT and financial
services will decline by just 6% in 2020, compared to the value of
goods trade, which will decline an estimated 13% (see 2019-2025
Predicted growth in international services trade graph).
Meanwhile, hard-hit traditional services categories such as
tourism will decline by around 40% in 2020, while air passenger
transport will decline by over 50%. As a share of total services
trade, these categories are projected to slide to 39% by 2025 –
down from 41% in 2019.
Geographic breakdown
The report also analysed these trends across eight large
developed economies, finding B2B services will be the main driver
of export growth, with financial services also important for key
hubs like the USA, UK, Hong Kong and Singapore. Outside this
sample, other predicted ‘hotspots’ for digital services export
growth over the medium term include Korea and Japan, Australia and
New Zealand, and Qatar and Saudi Arabia.
The USA will post the largest overall increase in services
exports during the forecast period, the result of its global
leadership in many categories of professional services, as well as
its investments in digital infrastructure and technological
innovation (see 2019-2025 Predicted growth in services exports by
country).
Furthermore, it is estimated a broad, multilateral
liberalization of trade policies on services could provide an
additional 11% boost to the value of global services trade by 2025,
which would equal an $890bn increase in the value of these
cross-border transactions.
“The pandemic has already super-charged the growth in digital
services and highlighted the potential for remote services to
transcend global borders. Over the next decade, we’re going to see
swathes of new business models redefine the possibilities for
cross-border transactions. And in the short-term, global trade in
services will be a vital component of recovery, and it will be
digitally focused industries that will be the driving force,” added
Summerill. The report, which aims to shine a light on the valuable
contribution that global digital services trade brings to the
economy now and its potential for the future, uncovers that trade
in services has typically been undervalued, when compared to trade
in goods or manufacturing.
The report estimates that services currently account for more
than half (55%) of all global trade flows, equating to US$13.7trn
of cross-border transactions in 2019. Official statistics state
that the share of services in total trade amounted to 24% in 2019,
up from 19% in 1995.1
“Our aim is to champion the industries fuelling economic growth
and recovery and to provide support to boost the growth of the
digital services sector,” concluded Summerill.
To access the report in full, please click here.
Note on research and methodology
The key framework in which Oxford Economics’ analysis is
conducted is its own Global Econometric Model (GEM). The GEM
replicates the world economy by interlinking 80 countries, 6
regional trading blocs and the Eurozone. These countries are
interlinked through international trade in goods and services,
competitiveness (measured by unit labour costs adjusted for the
exchange rate), capital markets, interest rates and commodity
prices. Historic data and forecasts are updated on a monthly basis
by our country economists.
*Definitions of international trade in services used for this
study:
- Business-to-business (B2B) services: Professional
services (e.g. engineering, legal) and royalty & license fees
(e.g. fees for the use of patented technology).
- Information and communications technology (ICT)
services: Services related to computers (e.g. software
development) and communication devices (e.g. telephone
services).
- Financial services: Activities of the finance industry
including banking, insurance and asset management.
- Transport & distribution: Services related to the
international movement of goods (e.g. shipping, air cargo and
cross-border road & rail transport) or transport of people
(e.g. air passenger services).
- Tourism & travel: Spending by temporary visitors to
another country for leisure, business or other purposes such as
education or medical tourism (exports are defined as inbound
tourism flows).
- Construction: Services relating to the
construction/demolition of buildings and other structures, as well
as installations and building repairs.
- Public services: Services commissioned by the public
sector.
About Western Union
The Western Union Company (NYSE: WU) is a global leader in
cross-border, cross-currency money movement and payments. Our
omnichannel platform connects the digital and physical worlds and
makes it possible for consumers and businesses to send and receive
money and make payments with speed, ease, and reliability. As of
June 30, 2020, our network included over 550,000 retail agent
locations offering our branded services in more than 200 countries
and territories, with the capability to send money to billions of
accounts. Additionally, westernunion.com, our fastest growing
channel in 2019, is available in over 75 countries, plus additional
territories, to move money around the world. With our global reach,
Western Union moves money for better, connecting family, friends,
and businesses to enable financial inclusion and support economic
growth. For more information, visit www.westernunion.com.
About Oxford Economics
Oxford Economics is a leader in global forecasting and
quantitative analysis. Our worldwide client base comprises more
than 1,500 international corporations, financial institutions,
government organisations, and universities.
Headquartered in Oxford, with offices around the world, we
employ 400 staff, including 250 economists and analysts. Our
best-in-class global economic and industry models and analytical
tools give us an unmatched ability to forecast external market
trends and assess their economic, social and business impact.
1 Oxford Economics estimates based on the OECD Trade in
Value-Added (TiVA) database, together with services activities
within manufacturing firms as reported in Miroudot and Cadestin
(2017), “Services in Global Value Chains: From Inputs to
Value-Creating Activities,” OECD Trade Policy Papers No. 197
WU-G
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200811005332/en/
Cristina Hoole Western Union Mobile: +44-(0)7766 070978
Cristina.Hoole@wu.com
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