Despite reaching a record $32-trillion in 2022, global trade growth turned negative in the second half of 2022 amid deteriorating economic conditions and rising uncertainties, reports the United Nations Conference on Trade and Development (Unctad).
For the first half of this year, global trade is set to stagnate, but could later benefit from a strong performance of trade in environment-friendly products, whose growth held strong throughout 2022, Unctad’s ‘Global Trade Update’ of March 23 shows.
Defying the downward trend, trade in environment-friendly goods – products that are designed to use fewer resources or emit less pollution than their traditional counterparts – grew by about 4% in the second half of 2022.
Their combined value hit a record $1.9-trillion in 2022, adding more than $100-billion compared with 2021.
Among green goods that performed especially well were electric vehicles (EVs) and hybrid vehicles, with growth of 25%; non-plastic packaging, with growth of 20%; and wind turbines, with growth of 10%.
One of the report’s authors Alessandro Nicita says growth in green goods trade is “good news for the planet, as these goods are key to protecting the environment and fighting climate change”.
This good news comes just days after the United Nations released its latest climate report, in which scientists have delivered a “final warning”, saying rising greenhouse-gas emissions are pushing the planet to the brink of irreversible change.
In addition, Unctad expects green industries to boom as countries scale up efforts to fight climate change and reduce emissions, projecting in its recent ‘Technology and Innovation Report 2023’, that the global market for EVs, solar and wind energy, green hydrogen and a dozen other green technologies to reach $2.1-trillion by 2030. This is four times more than their value currently.
“The patterns of international trade are anticipated to become more closely tied to the transition towards a greener global economy,” the ‘Global Trade Update’ outlines.
While imports and exports of green goods performed well throughout 2022, most other products experienced a decline in trade in the second half of 2022, with their downturn having continued in the fourth quarter.
The report shows that global trade in goods, worth $25-trillion in 2022, declined by 3% in the fourth quarter of 2022; but trade in services remained almost constant, finishing the year at $7-trillion.
Currently, Unctad forecasts that global trade in goods will increase by about 1% in terms of value in the first quarter of this year.
Meanwhile, trade in services is set to increase by about 3%, as demand continues to grow for information and communication technology services, and travel and tourism sectors recover further.
The transport equipment sector saw trade grow by 14% in the fourth quarter of 2022, although the result for 2022 as a whole was -6%.
On the negative side of the spectrum, energy experienced the largest decline in the fourth quarter of 2022, dropping by 10%; yet the sector still reported 24% growth for the year.
As 2023 progresses, Unctad says its outlook for trade remains uncertain amid ongoing geopolitical tensions and concerns about inflation, high commodity prices – especially for energy, food and metals – and the risky combination of high interest rates and public debt.
As of November 30, 2022, Unctad highlights that more than half of least developed and other low-income countries were either at high risk, or already in debt distress, and that the current record levels of global debt, coupled with high interest rates, will continue to negatively affect the macroeconomic conditions of many countries.
Further, Unctad notes that the global trade downturn in the fourth quarter of 2022 hit developing countries harder, as their imports and exports both fell by 6% compared with the previous quarter. The fall was largely owing to the 7% drop in exports from East Asian economies.
Nonetheless, Unctad forecasts that trade could improve in the second half of this year, with several positive factors likely coming into effect, including prospects of an averted recession in the European Union and the US, and a weaker dollar – which fell by almost 7% between November 2022 and February.
“As most trade is denominated in dollars, a weaker dollar would result in increased demand for traded goods,” the report states.
Unctad notes that concerns about global supply chain disruptions and shipping costs have also eased, with the Shanghai containerised freight rate index returning to pre-pandemic levels and is expected to remain low throughout this year.
In addition, the China purchasing managers index also increased by more than five percentage points since December 2022, indicating strong manufacturing and services activity.
“Overall, although the outlook for global trade remains uncertain, the positive factors are expected to compensate for the negative trends,” the report says.