Global trade sees positive growth in Q1 but faces headwinds: UNCTAD

Trade in goods increased by 1.9 per cent from the last quarter of 2022, contributing approximately $100 billion. However, UNCTAD's nowcast for the second quarter of 2023 suggests a deceleration in global trade growth due to factors such as persistent inflation, financial vulnerabilities, the war in Ukraine, geopolitical tensions, and recently downgraded world economic forecasts.

Despite fluctuations in global trade, the geographical proximity of international trade has remained relatively stable over the last five quarters, implying no significant trends in nearshoring or farshoring. Interestingly, a rising trend in ‘friend-shoring’ has been noted since late 2022, characterised by a shift in bilateral trade flows to favour countries that share similar political values, as per UNCTAD’s latest global trade update report.

Major events such as the war in Ukraine, the decoupling of US-China trade interdependence, and the impacts of Brexit played significant roles in shaping key bilateral trade trends. Specifically, the report highlighted a decline in trade interdependence between the US and China over the past year and a half, with the US becoming a less significant export market for China, and the US' dependency on China as a supplier decreasing even further.

The growth of merchandise trade varied among the world's major economies over the last four quarters. While Brazil, India, the US, and the European Union witnessed significant increases in both imports and exports, trade trends for other major economies were more subdued, and in many cases negative, between January and March 2023. However, China and India displayed substantial growth in exports during this period.

Year-on-year, all regions saw international trade growth, with the exception of the Russia and central Asian economies. The East Asian region, however, experienced below-average growth. On a quarterly basis, most regions experienced a decline in the value of trade in Q1 2023, barring the Pacific region, North America, and Africa, which saw marginal growth.

Intra-regional trade patterns mirrored these trends, with trade within Africa increasing by 3 per cent, outperforming other intra-regional trades. Over the past four quarters, global trade trends were influenced by the energy sector, where rising prices led to higher trade values until an 11 per cent quarterly drop was witnessed between January and March 2023. Sectors such as apparel and chemicals also saw increases in trade.

Fibre2Fashion News Desk (DP)