Goods Trade Softening Globally from 2022’s Record Level

Global trade reached a record $32 trillion in 2022, but merchandise trade growth is projected to rise by only 1% in the first quarter of this year and remain subdued due to a weaker global economy, according to a United Nations agency.

“While the economic outlook has improved, global trade growth is expected to stay subdued in 2023, with the possibility of a rebound in the second half of the year,” said a report released on Thursday by the United Nations Conference on Trade and Development (UNCTAD).

Total merchandise trade grew by 10% compared to the previous year, driven by strong global demand in the first half of 2022, the report noted. However, growth slowed in the second half, with trade declining by around $250 billion in the fourth quarter compared to the same period the year before.

Trade in services, however, is performing better. It is expected to increase by 3% this quarter, driven by ongoing demand for information and communication technology services and the continued recovery of travel and tourism sectors, according to UNCTAD.

A positive factor highlighted in the report is the growth in trade of environmentally friendly goods, such as electric vehicles, non-plastic packaging, and wind turbines. Other drivers of trade include an improved economic outlook in key economies, falling shipping costs, a weakening US dollar, and strong demand for services.

On the downside, macroeconomic risks to UNCTAD's forecast include rising inflation, high interest rates, growing public debt, and overall geopolitical uncertainty. The report also mentioned that the decoupling of the US and China poses an additional challenge to global growth, as it may further drive the regionalization of international trade.