Global Trade Expected to Contract by 5% in 2023

The United Nations Conference on Trade and Development (UNCTAD) has forecasted a 5% contraction in global trade in 2023 compared to the previous year, citing geopolitical tensions and export underperformance from developing nations as contributing factors. The UNCTAD estimates that world commerce will amount to approximately $30.7 trillion in 2023.

According to UNCTAD's projections, trade in goods is expected to decrease by around $2 trillion, or 8%, while trade in services is anticipated to grow by approximately $500 billion, or 7%. The report attributes the decline in global trade to export underperformance from developing countries and geopolitical issues.

The ongoing war in Ukraine, sanctions on Russia, and the evolving dynamics in the US-China trade relationship are identified as significant factors shaping key bilateral trade trends. These geopolitical factors impact the economies directly involved and influence other economies' trade dynamics.

The UNCTAD report highlights high interest rates in some economies as an additional impediment to commercial activity. The forecast for international trade in 2024 remains highly uncertain and generally pessimistic, with persistent geopolitical tensions, high levels of debt, and widespread economic fragility expected to influence global trade patterns negatively.

While specific economic indicators hint at potential improvements, UNCTAD emphasises that the outlook for 2024 remains uncertain, reflecting the complex and interconnected challenges faced by the global economy. Geopolitical tensions, economic uncertainties, and other factors continue to shape the trajectory of international trade, requiring careful monitoring and adaptive policy responses.