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UNCTAD: 2022 Global Trade Forecast ‘Very Uncertain’

Global trade growth remained strong during 2021, with the value of goods increasing during each quarter of the year, according to the United Nations Conference on Trade and Development’s (UNCTAD) “Global Trade Update” released Tuesday.

UNCTAD said the recovery has been more muted for trade in services, which remains below its levels of 2019.

Global trade growth was about 24 percent in the three months through September, on a year-over-year basis, significantly higher than pre-pandemic levels, with an increase of about 13 percent relative to the third quarter of 2019.

Valued at about $5.6 trillion, global trade in goods set a new all-time record in the period. Trade in goods is expected to remain constant in the fourth quarter.

Overall, 2021 is set to be a strong year for international trade. In 2021, the value of global trade in goods and services is expected to increase about $5.2 trillion relative to 2020 and up around $2.8 trillion relative to 2019, the equivalent of an increase of about 23 percent and 11 percent, respectively.

Trade in goods is projected to reach a record level of $22 trillion in 2021, while trade in services should be valued at an estimated $6 trillion in 2021, still slightly below its pre-pandemic level.

UNCTAD said the positive trend for international trade in 2021 was largely the result of the strong recovery in demand due to subsiding pandemic restrictions, economic stimulus packages and increases in commodity prices. However, the forecast for 2022 remains “very uncertain due to several factors.”

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These include slowing economic recovery–the strong economic recovery of the first half of 2021 has slowed during the second half, for example. In particular, the economic growth of China in the third quarter was below expectations and lower than in previous quarters.

Rising commodity prices and inflationary pressures might also negatively affect economic prospects and international trade flows, according to the report. 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.

Another key factor is the disruptions of logistic networks and increases in shipping costs.

“The recovery of 2021 has been marked by large and unpredictable swings in demand, which have resulted in an increased stress on supply chains,” UNCTAD said. “Logistic disruptions and high fuel prices have further contributed to supply shortages and spiraling shipping costs. In particular, the backlogs across major supply chain hubs that have characterized most of 2021 could continue into 2022 and therefore negatively affect trade and reshape trade flows across the world.”

Also of concern is ongoing geopolitical tensions among some of the major economies, the report noted, which could result in renewed trade confrontations with repercussions for international trade flows. Moreover, the implementation of regional trade agreements, such as the African Continental Free Trade Area and the Regional Comprehensive Economic Partnership, is expected to influence global trade patterns.

Regional trade within Africa and within the Asia-Pacific area is expected to increase, but by diverting trade away from other routes, UNCTAD noted.

In addition, governments are becoming increasingly supportive of domestic socioeconomic and strategic goals that impact trade. For example, the report cited government policies that aim to disincentivize the trade of product varieties with high carbon content or of goods that are linked to the exploitation of labor or the environment.

“Many governments may become keener on supporting strategic goals such as those related to food security or the indigenous growth of particular industries,” UNCTAD said. “Such policies would affect international trade patterns.”

The third quarter saw a strong increase in trade in most economic sectors. The value of trade in energy-related products grew the most, buoyed by high demand and increase in the price of fossil fuels.

Trade growth was also above average in many of the commodity sectors including minerals and metals. On the other hand, trade in some of the sectors related to the pandemic was more muted. In particular, growth in the trade of communication and office equipment was relatively low, as was the growth in the trade of textiles and apparel due to lower demand for personal protective equipment.