THE UNITED Nations Conference on Trade and Development expects global trade to contract by 5% by the end of 2023.
UNCTAD’s latest global trade update projects trade will have dropped by US$1.5 trillion to below US$31 trillion this year.
The update described the outlook for 2024 as “highly uncertain and generally pessimistic” citing geopolitical tensions, escalating debt and widespread economic fragility.
Other elements weighing on trade include lower demand in developed countries, less trade in East Asia, an uptick in trade restrictive measures, commodity price volatility and lengthening supply chains, particularly between China and the US.
But UNCTAD also noted some positive trends in 2023, such as a slight increase in trade volumes suggesting resilient global demand for imports, and a $500 billion increase in trade in services.
Some developing economies, particularly Mexico and East Asian countries, have had opportunities to better integrate the supply chains affected by geopolitical concerns.
The report also identified a growing trend in “friend shoring”, suggesting global trade patterns are increasingly influenced by geopolitics, with countries showing preferences for politically aligned trade partners.
UNCTAD said the trend has become more pronounced since late 2022. Meanwhile, the geographical proximity in international trade – nearshoring or far-shoring – has remained relatively stable.
The report also highlights a marked increase in trade concentration.
“There has been an overall decrease in the diversification of trade partners, indicating a concentration of global trade within major trade relationships,” it said.
UNCTAD also noted a significant uptick in 2023 in trade-restrictive measures, especially non-tariff measures.
It found the increase was driven by a resurgence of industrial policies and the pressing need for countries to fulfill climate commitments.
The report suggests these factors have prompted countries to favour policies that support domestic industries and reduce reliance on foreign supply chains.
Another recent UNCTAD report, Trade regulations for climate action, identified 2366 climate change related non-tariff measures affecting 3.5% of all potentially tradable goods and covering 26.4% of global trade.
“These inward-looking policies are anticipated to impede the growth of international trade,” UNCTAD said.
Its latest update on global trade presents a mixed picture across economic sectors.
The report shows a decline in 2023 for office and communication equipment (-17), textiles (-13%) and apparel (-11%).
In contrast, sectors like road vehicles and transport equipment have seen growth rates of 13% and 25%, respectively. However, the positive yearly trend in these sectors took a downturn in the third quarter of 2023.
Looking to 2024, the commodities sector faces continued uncertainty due to persistent regional conflicts and geopolitical tensions, UNCTAD said.
The growing need to secure critical minerals, vital for the energy transition, is expected to add to volatility in these markets.
