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Global trade is likely to be subdued this year after hitting a record high in 2021, according to data published Thursday by the UN Conference on Trade and Development (UNCTAD).
Overall, global trade last year reached a record $28.5 trillion, an increase of 25% from 2020 and 13% higher compared to 2019, before the COVID-19 pandemic.
UNCTAD’s Global Trade Update shows that global trade in goods remained strong in 2021 while trade in services finally returned to its pre-COVID-19 levels.
While most growth took place during the first half of 2021, progress continued in the second half. In the fourth quarter, trade in goods increased by almost $200 billion hit a new record of $5.8 trillion, UNCTAD said. Meanwhile, trade in services rose by $50 billion to reach $1.6 trillion, just above pre-pandemic levels.
The report shows that in the fourth quarter 2021, all major trading economies saw imports and exports rise well above pre-pandemic levels, but trade in goods increased stronger in the developing world than in developed countries. Exports from developing countries were about 30% higher than during the same period in 2020, compared with 15% for wealthier nations. This growth was especially higher in commodity-exporting regions as commodity prices increased.
With the exception of transport equipment, just about all economic sectors saw a substantial year-over-year increase in the fourth quarter.
“High fuel prices are behind the strong increase in the value of trade of the energy sector,” the report says, “Trade growth was also above average for metals and chemicals.”
Due to the global semiconductors shortage, trade growth in communication equipment, road vehicles and precision instruments was subdued, the report said.
Following the fourth quarter boost, UNCTAD indicates that trade growth will slow during the first quarter of 2022. While positive growth rates are expected for both trade in goods and services, levels will likely remain similar to the last three months of 2021.
“The positive trend for international trade in 2021 was largely the result of increases in commodity prices, subsiding pandemic restrictions and a strong recovery in demand due to economic stimulus packages,” the report says.
“As these trends are likely to abate, international trade trends are expected to normalize during 2022.”
Overall, trade growth in 2022 is likely to be lower than expected, UNCTAD predicts. The report notes that the International Monetary Fund has revised its world economic growth forecast downwards by 0.5 points, considering persistent inflation in the United States and concerns related to China’s real estate sector. Also, due ongoing logistic disruptions and rising energy prices, “efforts to shorten supply chains and to diversify suppliers” could affect global trade patterns during 2022. A trend of increasing “regionalization”, as well as “increasing reliance of geographically closer suppliers” and shifting global demand for environmentally sustainable products could also impact patterns.
Finally, the report also flags the record levels of global debt, warning that concerns over debt sustainability are likely to intensify due to mounting inflationary pressures.
“A significant tightening of financial conditions would heighten pressure on the most highly indebted governments, amplifying vulnerabilities and negatively affecting investments and international trade flows,” the report cautions.
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