Global trade is set to contract by 5 per cent to about $30.7 trillion this year due to underperforming exports from developing nations and geopolitical factors, the UN Conference on Trade and Development has said.
It will be a contraction of about $1.5 trillion from a record high of about $32 trillion in 2022, the Geneva-based body said in its Global Trade Update.
Trade in goods will be the hardest-hit as it is projected to decline by 8 per cent, or about $2 trillion, Unctad said. Services trade is expected to gain about 7 per cent, or $500 billion.
“Global trade has experienced negative growth since mid-2022, primarily driven by a substantial decline in goods trade, which continued to contract in the first three quarters of 2023,” the UN agency said.
“In contrast, trade in services has displayed more resilience and its growth remained positive throughout the same period.”
“Unctad nowcast foresees a shift in the fourth quarter of 2023, with an anticipated small increase in goods trade and a decline in services trade.”
Exports from developing countries have underperformed, with South-South trade – between developing countries – sharply decreasing and East Asia trade remaining below average, it said.
Geopolitical trends, including declining interdependence between China and the US, the world’s two biggest economies, are having an increasing impact on global trade, Unctad said.
“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.”
Economic activity is being hindered by high interest rates in several economies, according to Unctad.
The view is supported by the latest purchasing managers’ index readings for the US and China, which suggest a subdued outlook for industrial output in the coming months.
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