Inflation hits global trade

Geneva: Inflation has hit global trade and consumers and manufacturers face rising prices for imported products even as global trade is set to reach a record level of about US$ 32 trillion in 2022. The growth has turned negative during the second half of 2022, according to the Global Trade Update December 2022, released today by the United Nations Conference on Trade and Development (UCTAD).

The report warns that the ongoing trade slowdown is expected to worsen in 2023, and economic growth forecasts for 2023 are being revised downwards due to high energy prices, rising interest rates, sustained inflation in many economies, and negative global economic spillovers from the war in Ukraine.

While the outlook for global trade remains uncertain, negative factors appear to outweigh positive trends. Geopolitical frictions, persisting inflation, and lower global demand are expected to negatively affect global trade during 2023. 

Deteriorating economic conditions and rising uncertainties resulted in a trade slow-down during the second half of 2022, however, the decline in global trade had been nominal, as the volume of trade continued to increase throughout 2022, a signal of resilient global demand. Part of the decline in the value of international trade during the second half of 2022 was due to a decrease in the prices of primary products, especially energy. By contrast, the prices of internationally traded intermediate inputs and consumer goods have continued to increase during the same period, raising additional concerns about persisting global inflation.

The decline in the value of global trade has been so far limited to goods. The report notes that the demand for foreign goods proved resilient throughout 2022, with trade volumes increasing by 3 per cent. Trade in goods is expected to total almost US$ 25 trillion (an increase of about 10 per cent from 2021).

Trade in services has been more resilient, with its value continuing to rise during the second half of 2022. Trade in services is expected to total almost US$ 7 trillion (an increase of about 15 per cent from 2021). Those record levels are largely due to robust growth in the first half of 2022.

Conversely, trade growth has been subdued during the second half of the year. During Q3 2022, trade in goods declined by about one per cent relative to Q2 2022. Trade in services increased by about 1.3 per cent during the same period. The UNCTAD nowcast indicates that the value of global trade will decrease in Q4 2022 both for goods and for services.

While the value of international merchandise trade stabilized during the second half of 2022, the volume of trade increased during Q3 2022 and is expected to continue increasing during Q4. Positive growth in the volume of international trade indicates the resilience of global demand.

Trade in East Asian economies has shown more resilience, and South-South trade has lagged during Q3 2022.

– global bihari bureau