Global trade is anticipated to experience a decline of approximately 5% in 2023 compared to the preceding year’s record, primarily attributed to elevated borrowing costs impacting economies, reorientation of supply chains due to US-China tensions, and the emergence of policies constraining cross-border commerce, as reported by the United Nations Conference on Trade and Development (UNCTAD), based in Geneva.
According to UNCTAD, the total value of goods and services traded is forecast to reach $30.7 trillion in 2023, a decrease from the $32.2 trillion recorded in 2022. The primary driver behind this decline is identified as a $2 trillion, or 8%, contraction in merchandise trade, according to insights provided by Bloomberg News.
Contrastingly, the services trade is expected to witness a $500 billion, or approximately 7%, increase from the previous year, as highlighted in a report released by UNCTAD on Monday. This positive trajectory is attributed to lower costs for goods impacted by high inflation in the preceding year.
In the face of these developments, the report underlines a resilient global demand for imported products, citing a slightly positive trend in the volume of international trade, even amid a reduction in the value of traded goods in 2023.
UNCTAD underscores a noteworthy shift in trade dynamics, noting that countries aligned geopolitically are engaging in increased trade, while those in disagreement are experiencing a decline in bilateral trade. The agency acknowledges the uncertainty and pessimism surrounding the forecast for global trade, citing geopolitical tensions, high levels of debt, and economic fragility as potential negative influencers.
Geopolitical factors, persisting inflation, and concerns about global debt sustainability are expected to weigh on international trade flows, according to UNCTAD. The ongoing conflict between the Russian Federation and Ukraine is identified as a significant risk negatively affecting international trade in 2023.
Moreover, interest rates are anticipated to remain relatively high across many economies as central banks address persistent inflationary pressures. Commodity prices, especially for energy, food, and metals, are expected to remain above pre-pandemic averages, further impacting global trade conditions.
Despite these challenges, UNCTAD identifies positive factors, including an improved economic outlook for major economies, declining shipping costs, a weakening US dollar, and increased demand for services. The report concludes that, although the outlook for global trade remains uncertain, the positive factors are expected to offset the negative trends.
Looking ahead, UNCTAD envisions that international trade patterns in 2023 will be influenced by “near-shoring” and “reshoring” strategies, as companies focus on relocating production processes closer to target markets and bringing manufacturing back to home countries to enhance supply chain resilience.
