After two quarters of decline, trade in goods and services rebounded from January to March this year, but the outlook for the remainder of 2023 is bleak
The UN Conference on Trade and Development (UNCTAD) warned that the second quarter of 2023 will see a slowdown in global trade activity, in line with persistent inflation, financial vulnerabilities, the war in Ukraine and ongoing geopolitical tensions, which have also reduced the global economic outlook.
In its latest report, UNCTAD notes that, overall, the outlook for world trade in the second half of 2023 is pessimistic, "as negative factors predominate over positive ones".
The paper notes that, in the first quarter of this year, trade in goods and services grew in both volume and value following the downturn in the second half of 2022.
The first three months of 2023 saw a 1.9 per cent increase in merchandise trade over the last quarter of 2022, adding some $100 billion. Global services trade also increased by about $50 billion, up 2.8 per cent from the previous quarter.
The report notes that since the end of 2022, bilateral trade flows have risen, reflecting the priority being managed between countries with similar political values.
It explains that factors such as the war in Ukraine, the decoupling of trade interdependence between the United States and China, and the consequences of Brexit have played a significant role in these bilateral trade trends.
UNCTAD adds that, at the same time, there has been a decline in the diversification of trading partners, implying that global trade has become more concentrated among traditional players.
Declining US-China trade interdependence
As for the decline in US-China trade interdependence, it shows how in the last year and a half the United States has lost relative importance as an export market for China, while US dependence on China as a supplier has declined.
The study notes that growth in merchandise trade among the world's major economies has been uneven over the past year.
Brazil, India, the United States and the European Union all recorded significant increases in both imports and exports. But on a quarterly basis, the trade trends of the major economies were more subdued between January and March 2023, and in many cases negative. The notable exception is the significant export growth of China and India.
On an annual basis, international trade expanded in all regions except Russia and Central Asia, and growth in East Asia was below average.
Trade by sector
UNCTAD noted that world trade trends over the last four quarters were influenced by the energy sector, where rising prices translated into an increase in trade values, to a quarterly fall of 11 per cent between January and March 2023.
Other sectors that experienced trade increases were agri-food products, clothing, chemicals and road vehicles.
In contrast, trade declined in office and communication equipment, as well as in transport, where downward trends continued in the first quarter of 2023.
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