UNCTAD: Global trade forecast to decline worse in 2023

The United Nations trade body's December 2022 Global Trade Update notes that after a year of record gains, global trade growth turned negative in the second half of 2022.

According to UNCTAD, global trade in 2022 stands at $32 trillion, comprising $25 trillion in goods and $7 trillion in services. Those estimates represent a 10% increase in trade of goods in 2021 and a 15% increase in the service sector.

“Those record levels are largely due to robust growth in the first half of 2022. Conversely, trade growth has been subdued during the second half of the year,” UNCTAD said. The figures show that trade in services in the third quarter of 2022 decreased by 1% compared to the second quarter of 2022, of which trade in services increased by 1.3%.

UNCTAD's current assessment of trade "indicates that the value of global trade will decrease in Q4 2022 both for goods and for services."

Global trade trends (Source: UNCTAD)

While preliminary data showed a decline in the value of merchandise trade, the 3% increase in volume that UNCTAD said reflected the resilience of global demand. Other positive factors noted in the report include improvements in logistics, lower congestion and reduced freight rates.

Trade patterns are being affected by the reshaping of global supply chains through sourcing diversification, domestic and regional relocation, all of which are expected to impact trade in the next year. Trade patterns will also reflect the move towards a greener economy, with carbon-intensive goods and fossil fuel energy falling out of favor.

On the negative side, UNCTAD lists factors as slowing economic growth and high commodity prices. High energy prices are dampening economic forecasts as interest rates rise and commodity prices rise, reducing import demand.

The combination of rising interest rates and record-high global debt levels raises concerns about debt sustainability, especially for highly indebted governments in an environment of tightening regulations, said UNCTAD.

“The ongoing trade slowdown is expected to worsen for 2023. While the outlook for global trade remains uncertain, negative factors appear to outweigh positive trends".

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Source: Phaata.com (According to UNCTAD)

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