The outlook for global trade growth in the second half of 2023 is pessimistic amid the weakening global economy, persistent inflation and potential rise in trade restrictive measures, according to the United Nations’ trade and development body.
“Global economic forecasts have recently been revised downwards, and factors such as persistent inflation and financial vulnerabilities, along with the ongoing war in Ukraine and geopolitical tensions, pose challenges to global trade,” the UN Conference on Trade and Development (UNCTAD) said in its Global Trade Update report.
The report said these negative factors dominate the positive.
It identified the war in Ukraine and geopolitical tensions remaining the biggest factors impacting international trade through 2023.
“Global economic forecasts are being revised downwards and economic growth in many countries is expected to remain below historical trends,” it added. “Persistent inward-looking policies in large economies could result in an increase in trade restrictive measures, which would hold back international trade growth.”
UNCTAD projected an unfavorable trade for the latter half of the year despite shipping costs remaining low, increasing demand for services, and trade supporting the green transition.
“Global shipping capacity remains strong. The Shanghai containerized freight rate index has returned to pre-pandemic levels, and is expected to remain low throughout 2023,” the report said.
It said the current projection for the second quarter of 2023 indicates a slowdown in global trade growth.
This, after the global trade in goods and services rebounded 2 percent in the first quarter of the year relative to the fourth quarter of 2022, following two consecutive quarters of decline.
Global trade in goods increased by 1.9 percent in the first quarter of 2023, driven by a revival of economic activity in China, and by an increase in the trade of road vehicles and pharmaceuticals. Easing energy prices contribute to low global trade growth.
On the other hand, global trade in services remained resilient throughout 2022 and increased about 2.8 percent in the first quarter of 2023. Part of this growth reflects the continuing rebound in tourism and travel following the coronavirus disease 2019 pandemic.
“The UNCTAD nowcast suggests that global trade to be weak in Q2 (second quarter) 2023, as it is expected to remain at similar levels to Q1 (first quarter) 2023, both for goods and services,” it added.