The United Nations Conference on Trade and Development (Unctad) forecasts that global trade will reach about $28-trillion this year – an increase of 23% on 2020 levels, after stabilising in the second half of the year.
It notes, however, that the outlook for 2022 is “very uncertain”.
Global trade growth was about 24% in the third quarter – significantly higher than pre-pandemic levels, with an increase of about 13% relative to the third quarter of 2019.
The quarter-on-quarter growth of trade in goods was about 0.7%, while that of services was about 2.5%.
On a year-on-year basis, the trade growth rate for goods (22%) remains substantially higher than for services (6%).
Unctad notes that both the trend of a slower growth for the trade in goods, as well as a more positive trend for services, will probably continue in the fourth quarter of this year. As such, the organisation expects trade in goods to remain constant at about $5.6-trillion in the fourth quarter, while the trade in services will likely continue to slowly recover.
Overall, Unctad states that 2021 is set to be a strong year for international trade, with the value of global trade in goods and services expected to increase by about $5.2-trillion relative to 2020, and by about $2.8-trillion relative to 2019 – the equivalent of an increase of about 23% and 11%, respectively.
Further, trade in goods is projected to reach a record level of $22-trillion this year, while trade in services should be valued about $6-trillion – still slightly below its pre-pandemic level.
The positive trend for international trade this year is largely the result of the strong recovery in demand as a result of subsiding Covid-19 pandemic restrictions, economic stimulus packages and increases in commodity prices.
2022 UNCERTAINTY
Unctad’s forecast for 2022 remains uncertain as a result of several factors, including a slow economic recovery.
In this regard, Unctad reports that the strong economic recovery of the first half of this year slowed during the second half and that, in particular, China's economic growth in the third quarter was below expectations and lower than in previous quarters.
Rising commodity prices and inflationary pressures may also negatively affect economic prospects and international trade flows. In addition, many economies, including those in the European Union, continue to face Covid-19 related disruptions. These disruptions may negatively affect consumer demand and ultimately be reflected in trade statistics for the upcoming quarters, Unctad states.
In addition, 2022 is expected to be influenced by disruptions of logistic networks and increases in shipping costs; after this year was impacted by large and unpredictable swings in demand, which have resulted in an increased stress on supply chains.
Logistic disruptions and high fuel prices have further contributed to supply shortages and spiralling shipping costs. In particular, the backlogs across major supply chain hubs that have characterised most of this year could continue into 2022 and therefore negatively affect trade and reshape trade flows across the world.
Also, an ongoing global semiconductor shortage, if it persists into 2022, could continue to negatively affect production and trade in many manufacturing sectors.
Geopolitical factors and the regionalisation of trade flows could also weigh on trade in 2022, while governmental policies had the probability of affecting international trade.
In this regard, Unctad notes that governments are becoming increasingly supportive of domestic socioeconomic and strategic goals, with efforts towards a more socially and environmentally sustainable economy having the possibility of affecting international trade.
Unctad also notes that the additional borrowing of governments to sustain their economies during the Covid-19 crisis could pose continuous risks of financial instability, especially in the case of global inflationary pressures. As such, rising interest rates and obligations on debt servicing could bring instability to many countries and negatively affect investments and international trade flows, especially for developing countries whose fiscal policy space is limited.