Global trade is expected to hit a new record of $32 trillion in 2022, increasing 12 per cent amid "resilient" demand for goods and services, before slowing down next year, according to the United Nations Conference on Trade and Development (Unctad).
Trade in goods is set to total almost $25 trillion, an increase of about 10 per cent from last year, Unctad said in its Global Trade Update report on Tuesday. Trade in services is expected to reach almost $7 trillion, up by about 15 per cent from last year.
"The volume of trade continued to increase throughout 2022, a signal of resilient global demand," Unctad said. "The substantial trade growth during the ... year was largely due to increases in the value of the trade of energy products."
The record trade figures forecast for the year are largely due to growth in the first half of this year. However, deteriorating economic conditions and rising uncertainties have resulted in a trade slow-down during the second half of this year, the UN body said.
During the third quarter, trade in goods declined by about 1 per cent compared with the previous quarter. By contrast, trade in services was more resilient with an increase of about 1.3 per cent during the same period.
The value of global trade is now projected to decrease in the fourth quarter both for goods and for services, Unctad said.
"The ongoing trade slowdown is expected to worsen for 2023. While the outlook for global trade remains uncertain, negative factors appear to outweigh positive trends," Unctad said.
Geopolitical frictions, persisting inflation, lower economic growth, higher prices of traded goods and record levels of debt will weigh on international commerce in the next year, the report showed.
"Economic growth forecasts for 2023 are being revised downwards due to high energy prices, rising interest rates, sustained inflation in many economies and negative global economic spillovers from the war in Ukraine," it said.
High energy prices and the continued rise in the prices of raw materials and consumers goods are expected to dampen demand for imports and lead to a decline in the volume of international trade, it added.
"The ongoing tightening of financial conditions is expected to further heighten pressure on highly indebted governments, amplifying vulnerabilities and negatively affecting investments and international trade flows," Unctad said.
Other factors that will impact international trade patterns next year are the high risks and uncertainties that remain for global supply chains as well as the world's transition to a greener economy.
"The efforts towards a greener global economy are expected to spur demand for environmentally sustainable products, while reducing the demand for goods with high carbon content and for fossil fuels energy. This shift will reflect into international trade patterns," the report said.
On the other hand, improvements in the logistics sector and regional trade agreements coming to fruition are among the positive factors that could provide momentum to international commerce.
"Ports and shipping companies have now adjusted to the challenges brought by the Covid-19 pandemic. New ships are entering service, and port congestion is being resolved. Freight and cargo rates are still higher than the pre-pandemic averages, but their trend is downwards," Unctad said.