Global Trade To Contract 5% This Year

12 December 2023 – The United Nations Conference on Trade and Development (Unctad), in its December 2023 ‘Global Trade Update’, says global trade in goods will decline by about $2-trillion this year, but trade in services is set to expand by $500-billion.

Trade growth remained subdued in the fourth quarter, indicating persisting challenges. The outlook for 2024 remains uncertain, but overall pessimistic, Unctad adds.

Global trade has experienced negative growth since mid-2022, primarily driven by a substantial decline in goods trade, which continued to contract in the first three quarters of this year.

However, trade in services has displayed more resilience and its growth remained positive throughout the same period.

“Global trade has experienced a decline throughout 2023, primarily influenced by diminished demand in developed nations, underperformance in East Asia economies, and a decrease in commodity prices. These factors collectively contributed to a notable contraction in the trade of goods.

“In contrast, trade in services witnessed growth for the majority of 2023, a surge attributed to its delayed recovery from the Covid-19 downturn. However, the rebound of the services sectors slowed down considerably during the second half of 2023.

“Unctad now foresees a shift in the fourth quarter, with an anticipated small increase in goods trade and a decline in services trade,” the organisation said.

Overall, the ‘Global Trade Update’ projects that global trade will amount to about $30.7-trillion this year, representing a contraction of about 5%, or $1.5-trillion, compared with the record high reached in 2022.

Specifically, trade in goods is expected to contract by nearly $2-trillion, or 8%, while services trade should gain about $500-billion, or 7%.

Further, even though the value of traded goods decreased this year, the slightly positive trend in the volume of international trade suggests a resilient global demand for imported products, the update shows.

Meanwhile, trade downturn has been more marked for developing countries with South-South trade underperforming throughout the majority of this year. These trends can be attributed not only to the downturn in the East Asia regions, but also to diminished trade between Asian economies.

“Looking ahead to 2024, while certain economic indicators hint at potential improvements, persistent geopolitical tensions, high levels of debt and widespread economic fragility are anticipated to exert negative influences on global trade patterns,” Unctad noted.

Merchandise trade across major economies experienced a consistent downturn over the past four quarters. Russia recorded an annual positive growth in imports, while Brazil and the European Union have shown positive trends in exports.

Quarter-on-quarter statistics indicate a persisting negative trend, with all major economies, except the US, reporting declines in either imports or exports, or both.

While the comparison of yearly and quarterly growth suggests some improvement in trends for several economies, the overall baseline remained negative in the third quarter of this year.

“Trade has decreased across major economies, yet the third quarter of 2023 indicates a milder downturn,” Unctad said.

Further, while service-related data is reported with a one-quarter lag compared to merchandise data, on an annual basis services trade increased in most economies between the second quarter of 2022 and that of 2023.

However, quarterly growth in the second quarter of 2023 has been lower compared to the annual averages, signalling that the increasing trend for the service sector may be reaching a plateau.


Meanwhile, the decline in global trade is driven by developing countries and South-South trade, and, while there has been resilient trade in North America, there has been an underperformance in East Asia and Africa.

On average, the recent decline in global trade has been more marked for developing countries. On an annual basis, developing countries’ imports declined by an average of 6% and exports declined by an average of 7%.

When East Asian economies are excluded, yearly trade declines for developing countries were lower, Unctad said in the report.

“However, figures on a quarter-on-quarter basis indicate more similar patterns across developing and developed countries averages. On a yearly basis, South-South trade demonstrates a notable decrease, yet preliminary data for the third quarter of this year indicate a milder decline,” the organisation said.

Further, most regions have undergone negative trade growth, both on annual and quarterly basis. Notably, the North American region has experienced better performance, particularly in intra-regional trade.

In contrast, East Asian trade exhibited notable weakness throughout 2023, with some signs of recovery observed in the third quarter of the year.

Russia, Central Asia and the African region show a strong decline in exports, especially on an annual basis. During the past quarter, intra-regional trade was particularly weak in Africa, Europe, and in Russia and the Central Asian economies, Unctad noted.

Similarly, global sectoral trade trends over the past four quarters were negative for most sectors. Annual statistics indicate that the decline in global trade was driven by lower trade in the office and communication equipment, as well as textiles and apparel, sectors.

“Conversely, global trade was supported by a positive trend in the road vehicles and transport equipment sectors,” the update states.

“On a quarterly basis, most sectors experienced a decline in trade, although apparel, communication, and office equipment sectors rebounded from previous low. In contrast, trade trends remained negative in agri-food, textiles, metals and minerals.

“Notably, the positive trajectory observed in the trade of transport equipment and motor vehicles sectors observed in the annual statistics reversed during the third quarter of 2023,” the report highlighted.

Further, since 2022, the geographical proximity of international trade has stayed relatively consistent, showing minimal nearshoring or far-shoring trends.

However, there has been a noticeable rise in the political proximity of trade since the latter part of 2022. This suggests a shift in bilateral trade preferences toward countries with similar geopolitical stances, or friend-shoring.

Concurrently, there has been an overall decrease in the diversification of trade partners, indicating a concentration of global trade within major trade relationships, Unctad pointed out.

Global trade is becoming more concentrated and geopolitically close. The war in Ukraine, the sanctions on Russia, and the de-risking in the US-China trade relationship are playing a significant role in shaping key bilateral trade trends.

These factors not only impact the economies directly involved, but also indirectly influence trade dynamics of other economies, the update states.


There is positive economic growth, but with significant disparities, and global economic forecasts remain steady, but fall below historical averages.

Substantial disparities persist among countries and regions in terms of anticipated economic outlooks for 2024. Such disparities will influence patterns of trade, Unctad said.

Economic activity is also being hindered by persistently high interest rates in several economies. The latest Purchasing Managers’ Index readings for China and the US suggest a subdued outlook for industrial output in the coming months.

Commodity price volatility is also having an impact. Regional conflicts and persistent geopolitical tensions are likely to add further uncertainty to commodity markets.

Additionally, the increasing importance of securing critical minerals for the energy transition is expected to affect prices and further contribute to market volatility in these commodities, the organisation noted.

Another factor influencing global trade is the lengthening of supply chains. Global trade is being influenced by the way supply chains respond to shifts in trade policy and geopolitical tensions, with notable impacts observed in supply linkages between China and the US.

Companies from other regions, particularly in East Asian economies and Mexico, have had opportunities to become more integrated into the supply chains affected by geopolitical concerns, the update shows.

Further, there has been an increase in subsidies and trade restrictive measures. The resurgence in the use of industrial policy and the urgency of meeting climate commitments are driving changes in trade policies, both in the form of tariffs and non-tariff measures.

Use of trade restrictive measures has risen this year. These inward-looking policies are anticipated to impede the growth of international trade, the report highlighted.

Meanwhile, there is currently low demand for container shipping, as reflected by the lagging performance of the Shanghai Containerised Freight Rate Index. Conversely, the Baltic Dry Index has exhibited a positive trend in the second half of this year, indicating a rise in global demand for raw materials, Unctad said. Source: Engineering News