Global trade in goods is likely to increase by about 1 per cent (year-on-year) in the first quarter (Q1) of 2023 while trade in services is expected to grow by about 3 per cent in the same period amid deteriorating economic conditions and rising uncertainties, per UNCTAD’s latest Global Trade Update released on Thursday.

In 2022, trade in goods was about $25 trillion, increasing by 10 per cent over 2021, while trade in services increased 15 per cent to about $7 trillion. “Those record levels are largely due to robust growth in the first half of 2022. Conversely, trade growth has been sub-par during the second half of 2022, especially in the last quarter of 2022,” the report highlighted.

In Q4 2022, trade in goods declined by about $250 billion relative to Q3 2022 while trade in services remained virtually constant. 

Despite rising geopolitical tensions (including the continuing war in Ukraine), global trade has proven to be remarkably resilient during 2022, the report observed. However, deteriorating economic conditions, the lifting of zero-Covid policies, and renewed concerns about inflationary pressures have resulted in a significant trade slowdown during Q4 2022, it said.

“While the economic outlook has improved, global trade growth is expected to remain subdued in 2023, with the possibility of a pickup in the second half of the year. Overall, although the outlook for global trade remains uncertain, the positive factors are expected to compensate for the negative trends,” UNCTAD said in its forecast.

Negative factors

The negative factors that would weigh on world trade performance are geopolitical tensions, including the Russian Federation’s conflict with Ukraine, high inflation, commodity prices & interest rates and concerns around current record levels of global debt.

The positive factors that could push growth include improved economic outlook in major economies such as China, the EU and the US, decreasing shipping costs, weakening US dollar and increase in global demand for services.

The report pointed out most major economies were affected by the global downturn in international trade during Q4 2022. “Except for imports by the Russian Federation, trade in goods for all major economies was substantially below levels of the previous quarter. China’s trade in goods was notably lower compared to both the previous quarter and the same period in the previous year,” it said.

India’s exports down

India’s exports, too, declined 7 per cent in Q4 2022 compared to the same period in the previous year, while its imports grew 2 per cent, per the report.

The value of trade in goods for the US and the EU, while lower relative to the previous quarter, was higher relative to Q4 2021.