The new “Global Trade Update” from the United Nations Conference on Trade and Development (UNCTAD) showed that in 2021 world trade in goods remained strong and trade in services finally returned to its pre-Covid-19 levels.
However, the report indicated that trade growth will slow during the first quarter of 2022. Overall, the value of global trade reached a record level of $28.5 trillion in 2021, a 25 percent increase over 2020 and 13 percent higher than 2019.
After a relatively slow third quarter, trade growth picked up again in the fourth quarter, when trade in goods increased by almost $200 billion, achieving a new record of $5.8 trillion, the report noted. At the same time, trade in services rose by $50 billion to reach $1.6 trillion, just above pre-pandemic levels.
The report shows that in the fourth quarter of 2021, all major trading economies saw imports and exports rise well above pre-pandemic levels in 2019. Trade in goods increased more strongly in the developing world than in developed countries Exports of developing countries were about 30 percent higher than during the same period in 2020, compared with 15 percent for wealthier nations.
Except transport equipment, all economic sectors saw a substantial year-over-year increase in the value of their trade during the final quarter of 2021.
“High fuel prices are behind the strong increase in the value of trade of the energy sector,” the report said. “Trade growth was also above average for metals and chemicals.”
As a result of the global shortage of semiconductors, trade growth in communication equipment, road vehicles and precision instruments was subdued.
The UNCTAD report indicates that trade growth will slow during the first quarter of 2022. But positive growth rates are expected for trade in goods and services, keeping trade values at levels similar to the last three months of 2021.
“The positive trend for international trade in 2021 was largely the result of increases in commodity prices, subsiding pandemic restrictions and a strong recovery in demand due to economic stimulus packages,” the report said. “As these trends are likely to abate, international trade trends are expected to normalize during 2022.”
Trade growth in 2022 is likely to be lower than expected, given the macroeconomic trends. The International Monetary Fund has revised its world economic growth forecast downward by 0.5 points, the report noted, considering persistent inflation in the United States and concerns related to China’s troubled real estate sector.
It also pointed to ongoing logistic disruptions and rising energy prices, saying that “efforts to shorten supply chains and to diversify suppliers could affect global trade patterns during 2022.”
On trade flows, the report projected the trend of regionalization will continue growing because of various trade agreements and regional initiatives, as well as “increasing reliance on geographically closer suppliers.”
In addition, trade patterns in 2022 are expected to reflect the increasing global demand for products that are environmentally sustainable. The report also flagged record levels of global debt, warning that concerns over debt sustainability are likely to intensify due to mounting inflationary pressures.
“A significant tightening of financial conditions would heighten pressure on the most highly indebted governments, amplifying vulnerabilities and negatively affecting investments and international trade flows,” the report added.