DECLINE in global trade, which started in the second half of the year, is expected to worsen in the coming year, according to the United Nations Conference on Trade and Development.


"While the outlook for global trade remains uncertain, negative factors appear to outweigh positive trends," the UN trade body said.


The negative indicators include the lower global economic growth, inflation, and concerns of debt sustainability.


Economic growth forecasts for 2023 are being revised downwards due to high energy prices, rising interest rates, sustained inflation in many economies, and negative global economic spillovers from the war in Ukraine.


Meanwhile, persistently high energy prices and the continued rise in the prices of intermediate inputs and consumers goods are expected to dampen demand for imports and to lead to a decline in the volume of international trade.
The record levels of global debt and the increase in interest rates also pose significant concerns for debt sustainability.


The ongoing tightening of financial conditions is expected to further heighten pressure on highly indebted governments, negatively affecting investments and international trade flows, Unctad said.


Potential upsides include improvements in the logistics of global trade, as well as signings of trade agreements which could provide some momentum for international trade.


"Ports and shipping companies have now adjusted to the challenges brought by the Covid-19 pandemic," it said. "New ships are entering service, and port congestion is being resolved. Freight and cargo rates are still higher than the pre-pandemic averages, but their trend is downwards."


Risks and uncertainties however remain high for global supply chain operations. Risk mitigation strategies, such as the diversification of suppliers, reshoring, near-shoring and friend-shoring, will likely affect international trade patterns in the coming year, it said.


Global trade is set to reach a record level of about $32trn this year, comprising $25trn of trade in goods, up 10% year-on-year, and $7trn of services, up 15% compared to 2021.


The record level was largely due to robust growth in the first half of the year, it said.


Trade growth has been subdued during the second half of the year, with trade in goods declined about 1% in the third quarter, down 1% quarter-on-quarter.


The UN group indicated that the value of global trade will decrease in the fourth quarter of 2022 both for goods and for services.
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