Int’l trade flows seen to further weaken in 2023

 WEAK TRADE OUTLOOK. The United Nations report says the prolonged supply chain disruptions could continue to hinder trade performance. / AP
WEAK TRADE OUTLOOK. The United Nations report says the prolonged supply chain disruptions could continue to hinder trade performance. / AP

INTERNATIONAL trade flows are projected to further weaken this year as prolonged supply chain disruptions and possible further escalations in global energy prices could continue to hinder trade performance, according to a United Nations (UN) report.

The World Economic Situation and Prospects report said the baseline scenario projects that the volume of global trade in goods and services will nearly stagnate in 2023, contracting slightly by 0.4 percent, down from six percent in 2022, and compared to the average growth rate of 4.5 percent between 2000 and 2021.

“The already weak trade outlook is subject to a high degree of uncertainty, including the pace and depth of monetary tightening in the major economies and the duration and intensity of the war in Ukraine,” it said, adding that global demand for goods and services is expected to weaken as fiscal and monetary policy stances tighten.

The report said if new and highly transmissible and vaccine-evading variants of coronavirus disease 2019 (Covid-19) result in new temporary closures of factories and key ports, “delivery times would lengthen again, causing global supply shortages and affecting manufacturing production and trade activities.”

It said unresolved trade tensions between China and the United States also continue to threaten the global trading system through market fragmentation.

“Although China’s growth pick-up in 2023 could provide some positive news for trade activities, high uncertainties remain around how the reopening will shape the country’s domestic demand and economic activities,” the report added.

Prolonged supply chain disruption

The UN report said prolonged supply chain disruptions could continue to hinder trade performance.

“Global supply chains were already under pressure due to trade tensions before the pandemic. The pandemic-induced lockdowns and the war in Ukraine have led to severe physical and logistical dislocations and worsened pre-existing bottlenecks,” it said.

Furthermore, the report said elevated transport costs due to fuel price volatility and supply chain disruptions could boost merchandise prices and constrain demand.

“Possible further escalations in global energy prices caused by the protracted war in Ukraine may prevent shipping costs from returning to pre-crisis levels,” it added.

International merchandise trade grew at a slower pace in 2022 compared to 2021 amid waning base effects and the shift in demand from more durable goods during the pandemic to the consumption of services as economies began to emerge from lockdowns.

World services trade has regained its pre-pandemic level. In the second quarter of 2022, services trade grew by 17 percent over the same quarter in 2021 and totalled about US$1.7 trillion.

Among different services, the growth of international tourism has been particularly strong due to improved economic conditions, the release of pent-up demand and gradual removal of pandemic-related restrictions. (Philexport News and Features)

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