UNCTAD: Positive Start, Pessimistic Outlook for Global Trade in 2023

Trade growth was positive for both goods and services in the first quarter of 2023, according to the UNCTAD’s latest Global Trade Update report. However the UN trade organization suggests a slowdown in global trade growth in the second quarter due to negative factors such as 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 dominate the positive,” the report stated.

According to the report, trade in goods increased by 1.9% in the first quarter of 2023, adding $100 billion, while global services trade increased by 2.8%, adding $50 billion compared to the previous quarter.

UNCTAD’s report notes a rise in “friend-shoring” and a decline in diversification of trade partners, implying that global trade has become more concentrated among major trade relationships. It highlights the declining trade interdependence between the United States and China, as well as the impact of the war in Ukraine and Brexit on bilateral trade trends.

The report also shows varying trade performance among major economies and regional trade trends, as well as how various sectors fare. Brazil, India, the United States, and the European Union experienced significant increases in both imports and exports, but on a quarter-over-quarter basis, trade trends for major economies were more subdued between January and March 2023, with the exception of significant growth in exports from China and India.

International trade grew in all regions except for Russia and central Asia in the first quarter, but East Asia’s growth was below average, according to the report. The first quarter of saw a decline in trade value in most regions, except for the Pacific, North America, and Africa, which had marginal growth. Intra-regional trade followed similar patterns, with African trade increasing by 3%.

Meanwhile, the energy sector experienced rising prices and higher trade values until a 11% quarterly drop between January and March 2023. Other sectors that experienced trade increases were agri-food products, apparel, chemicals, and road vehicles. Conversely, trade declined in office and communication equipment, as well as transport, where downward trends continued into the first quarter of 2023.

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