Global trade projected to decline 4.5% by end of 2023

Ahram Online , Thursday 14 Dec 2023

Global trade is projected to decline by 4.5 percent year-on-year (YoY), or $1.5 trillion, by the end of 2023, to reach $31 trillion, according to the United Nations Conference on Trade and Development (UNCTAD).

UNCTAD logo
UNCTAD logo

 


The latest Global Trade Update released by UNCTAD attributed this anticipated decline to several factors, including reduced demand in developed countries, a decrease in trade activity in East Asia, an increase in trade-restrictive measures, commodity price volatility, and the elongation of supply chains.

The report indicated that trade in goods is expected to contract by nearly $2 trillion, or 7.5 percent, in 2023.

Services trade is projected to gain $500 billion, or seven percent, partially due to a delayed recovery from the COVID-19 pandemic.

Looking ahead to 2024, UNCTAD expressed "a highly uncertain and generally pessimistic outlook," citing ongoing geopolitical tensions, escalating debt levels, and widespread economic fragility as factors that are likely to exert negative influences on global trade.

The report revealed an increasing influence of geopolitics on global trade, with countries displaying preferences for politically aligned trade partners.

This emerging trend, termed "friend-shoring," indicates a decrease in the diversification of trade partners and a concentration of global trade within major trade relationships.

The Global Trade Update also highlighted a significant rise in trade-restrictive measures, particularly non-tariff measures (NTMs), during 2023.

This increase is driven by a resurgence of industrial policies and the imperative for countries to fulfil their climate commitments. As a result, countries have favoured policies that support domestic industries and reduce reliance on foreign supply chains.

In a separate report by UNCTAD on "Trade regulations for climate action," 2,366 climate change-related NTMs affecting 3.5 percent of all potentially tradable goods and covering 26.4 percent of global trade were identified.

The report suggests that these inward-looking policies are expected to hinder the growth of international trade.

The Global Trade Update further revealed declines in specific sectors during 2023. Office and communication equipment declined by 17 percent, while textiles and apparel saw decreases of 13 percent and 11 percent, respectively.

Road vehicles and transport equipment sectors increased by 13 percent and 25 percent, respectively. However, these positive trends experienced a downturn in the third quarter of 2023.

Looking ahead, the commodities sector faces continued uncertainty due to persistent regional conflicts and geopolitical tensions. The increasing demand for critical minerals, essential for the energy transition, is expected to contribute to volatility in these markets.

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