Global trade picks up but outlook for rest of year bleak

After two consecutive quarters of decline

Global trade in goods and services rebounded between January and March 2023. For the second quarter of 2023, UNCTAD's current forecast suggests a slowdown in global trade growth, pointing to the recent downgrade of global economic forecasts and factors such as persistent inflation, financial vulnerabilities, the war in Ukraine and geopolitical tensions.

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During the first quarter of 2023, trade growth was positive for both goods and services, according to the latest UNCTAD Global Trade Update published on June 21. After the recession in the second half of 2022, global merchandise trade rebounded in both volume and value.

In the first three months of 2023, merchandise trade increased by 1,9% compared to the last quarter of 2022, adding about 100.000 million dollars. Global trade in services also increased by about $50.000 billion, 2,8% more than the previous quarter.

For the second quarter of 2023, the current forecast of the UNCTAD suggests a slowdown in global trade growth, pointing to the recent downgrade of global economic forecasts and factors such as the persistent inflation, financial vulnerabilities, the war in Ukraine and geopolitical tensions.

"Overall, the outlook for global trade in the second half of 2023 is pessimistic, as negative factors outweigh positive ones," the report states.

 

 
"Friend-shoring" and the growing concentration of world trade

Over the past five quarters, the geographic proximity of international trade has remained relatively stable, suggesting the absence of significant trade trends. “nearshoring” or “farshoring”, at least on average.

The report states that the "friendly-shoring" has been increasing since the end of 2022, characterized by a reorientation of bilateral trade flows to give priority to countries that share similar political values.

La war in ukraine, the dissociation of commercial interdependence between United States and China, and the consequences of Brexit have played a significant role in shaping key bilateral trade trends during this period.

"At the same time, there has been a decrease in the diversification of trading partners, which means that global trade has become more concentrated among the main trading relationships," the report notes.

The report illustrates the continued decline in trade interdependence between the United States and China. It shows how in the last year and a half, The United States has lost relative importance as an export market for China. During this period, the United States' dependence on China as a supplier has decreased even further.

Uneven trade performance between major economies

The report shows that merchandise trade growth has been uneven across the world's major economies over the past four quarters.

Brazil, India, the United States and the European Union recorded significant increases in both imports and exports.

But in quarterly terms, the trade trends of the main economies were more moderate between January and March 2023, and in many cases negative. The notable exception is the significant growth in exports from China and India.

Regional trade trends

In annual terms, all regions saw international trade grow, except the Russian Federation and the economies of Central Asia.

But the growth in the region of Eastern Asia has been significantly below average.

On a quarterly basis, the first quarter of 2023 witnessed a decline in trade value in most regions except the South Asian region. Pacific, North America and Africa, which experienced marginal growth.

Intraregional trade during the same period followed similar patterns. But it is worth noting that intra-Africa trade increased by 3%, outpacing the rest of intra-regional trade.

Evolution of the different sectors

Global trade trends over the last four quarters were influenced by the energy sector, where rising prices translated into an increase in trade values, up to a quarterly drop of 11% between January and March 2023.

Other sectors that experienced trade increases were agri-food products, clothing, chemicals and road vehicles.

In contrast, trade decreased in office and communication equipment, as well as transportation, where downward trends continued in the first quarter of 2023.