Driven by a $2 trillion decline in goods trade, global trade is set to contract by five per cent in 2023 compared to last year, the United Nations trade body said on Monday, while making an overall pessimistic forecast for 2024.
In 2023, global trade is estimated to reach $30.7 trillion, representing a contraction of about $1.5 trillion (or five per cent) compared to the 2022 record high, the UN Conference on Trade and Development (Unctad) said.
Worldwide trade in goods is set to decline eight per cent, or by $2.0 trillion, while services trade should increase by about $500 billion, or seven per cent, the Geneva-based trade body said. “Trade in services has displayed more resilience and its growth remained positive throughout the same period.”
While attributing this contraction in part to underperformance of exports from developing countries, Unctad said geopolitical trends and declining interdependence between China and the United States are increasingly affecting global trade.
The UN agency forecasts world economic growth to decelerate to 2.4 per cent this year from three per cent in 2022 as “deepening inequalities, mounting debt, and an uneven post-Covid recovery take hold.”
This trend, the UN body said, would spill over into 2024, with the outlook for global trade remaining “highly uncertain and generally pessimistic,” with substantial disparities expected to persist among countries and regions in terms of anticipated economic forecasts.
Trade growth has remained subdued in Q4 2023, indicating persisting challenges, it said, adding that the ‘outlook for 2024 is still uncertain but overall pessimistic’. “While certain economic indicators hint at potential improvements, persistent geopolitical tensions, high levels of debt, and widespread economic fragility are anticipated to exert negative influences on global trade patterns,” it said.
“Exports from developing countries underperformed as South-South trade sharply decreased and East Asian trade remained below average,” it said in its Global Trade Update.
“The war in Ukraine, the sanctions on the Russian Federation, and the de-risking in the US-China trade relationship are playing a significant role in shaping key bilateral trade trends,” it said.
“These factors not only impact the economies directly involved but also indirectly influence the trade dynamics of other economies,” it said, noting that economic activity is being hindered by high interest rates in several economies.
“While certain economic indicators hint at potential improvements, persistent geopolitical tensions, high levels of debt, and widespread economic fragility are anticipated to exert negative influences on global trade patterns,” it said.
The trade body noted that volatility in commodity prices is adding to the uncertainty, with regional conflicts and lingering geopolitical tension expected to further dampen sentiment.
Global trade is also being influenced by the way supply chains respond to shifts in trade policy and geopolitical tensions, with notable impacts observed in supply linkages between China and the US, it said.
“Companies from other regions, particularly in East Asian economies and Mexico, have had opportunities to become more integrated into the supply chains affected by geopolitical concerns,” Unctad said.