The global movement of products, skills and money across borders is at an all-time high. The global flow of knowledge and skills make up today’s modern economy. This has created a new era of connectivity across companies and countries. Global flows in a digital age open new avenues of connectedness. Not being a part of this global economy can have disastrous impacts for all businesses, old and new.

The closure of world borders due to the COVID-19 pandemic has affected global GDP. As a result, in the US, a $3 trillion GDP fall was seen in 2020 (source), a decrease for the first time in 10 years. Despite this, global GDP surpassed $84 trillion. Of this, goods and services accounted for 29.5% of the global trade. The financial sector itself makes up for about 20-25% of global GDP.

Barring unforeseen circumstances, the global economy is growing fast. The World Bank expects a 5.6% increase in global flows. These more connected economies have emerged from the digital age. Technology and the internet have made the exchange of commodities across borders easy. Recent projections show a probable increase of up to $122 trillion by the year 2026.

The Global Connectedness Index

The interruption to global trade because of the pandemic disrupted predictions. Global flows fell drastically in 2020, but another channel emerged. Today, more than ever, digital flows are relevant and essential. Global flows in a digital age take on a new form, and are reshaping economies today. The 2020 DHL Global Connectedness Index (GCI) shows a picture of global connectivity. It has mapped globalisation across over 3.5 million data points. These show, despite recent setbacks, a hopeful outlook for global trade.

The drop in goods trading in March and April of 2020 was lower than those during the Great Depression. This in turn sparked fears of a return of a global financial crisis. These fears subsided when trade returned to pre-pandemic levels in November. Given the shift to remote working, trade in electronics saw a particular boom. Medical supplies trade also increased with the burdens on global healthcare systems.

Global financial flows took a major hit as well, dropping about 42% in 2020. However, they showed a quick recovery. With a quick international response to the developing crisis, investor confidence returned. The GCI showed developed economies suffered in terms of investment inflows. Compared to developing countries, these economies were hit harder. With borders closed down, the flow of people was inadvertently hit. In many cases, it came to a complete standstill as countries tried to battle the spread of COVID-19. Dropping to 1990 levels, people flows are unlikely to recover before 2023.

The digital age has revolutionised much of how we obtain and disseminate information. With the world on lockdown, digital flows doubled to 48% in 2020. However, given the situation, the extent of this surge may be considered a one-off event. The almost complete shift to online learning and e-commerce has developed new possibilities. While this is likely to die down, it offers new avenues to explore.

global flows in a digital age
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Changing Trends in Trade

Data shows developed economies are able to stay more connected than developing ones. They also experience greater GDP growth. The 2020 index shows the Netherlands as the most globally connected country. It also happens to be the country with one of the largest GDP per capita as of 2020. Its infrastructure and connectivity have enabled the country to remain tethered.  Singapore, Belgium and Ireland are also ranked top five for global connectivity. These countries also recorded high GDP growth.

The UN Conference on Trade and Development 2020 report outlines trends in trade. It shows developing countries faring much better than developed economies. The general decline notwithstanding, such countries generally did better. Given their more resilient economies, they handled the unexpected economic conditions much better. While for most countries trade decreased, it increased  in the West African region. East Asian countries also experienced an increase towards the end of 2020.  While the US-China bilateral trade also dipped, their recovery outranked global trade.

Over the last 10 years, the trade volume of goods has increased. This trend was seen to slow down for a few years. However, growth continued from 2017 onwards, growing at the highest rate since 2011. Developing countries performed better, doubling their trade over the last decade. In terms of services, developed countries have held ground. Developing countries still play a lesser role in providing services. Developed countries accounted for $4.1 trillion in services trade in 2019. Developing countries, on the other hand, recorded about $2 trillion.  

The Digital Age

Global flows in a digital age have not only transformed, but created new flows. Increased global online traffic has increased the importance of the digital market. While the growth spurt is expected to relax, it has further pushed a new age of globalization. The lower costs of digital technologies make them a prime channel for distribution. Their global reach means there is no limit to consumers.  The production, exchange and promotion of goods and services digitally is invaluable.

Global production, demand and trade are all at a rise. The free-flow of capital, knowledge and people across borders is expanding economies. Digital technologies with no barriers have greatly facilitated this. In this digital economy, players big and small have joined. Everyone, from multinationals to individuals, can now reach a global audience.

The world has certainly become more connected, and continues on that path. Global digital flows are happening on a massive scale, yet appear almost invisible. With no actual movement to distinguish, it is easy to underestimate our connectedness. Being connected is no longer a choice, it is necessary to stay in the game. The culmination of every imaginable resource in the online world is reshaping economies. Smart planning and management is required to take advantage of the digital opportunities.