Global trade reached a record high in 2021, but it is expected to slow this year for many reasons including continuing delays in global supply chains, UN economists said on Thursday. Trade can significantly reduce poverty.
First, the good news. Worldwide commerce amounted to around $28.5 trillion in the year gone past. According to the UN Conference on Trade and Development (UNCTAD), this represents an increase of almost 13 per cent compared to the pre-pandemic level of 2019.
“Global trade growth remained strong during 2021, as its value continued to increase through each quarter of 2021, UNCTAD said, in its Global Trade Update 2022. “Trade growth was not only limited to goods. Trade in services also grew substantially through 2021, to finally reach pre-pandemic levels during Q4 2021.”
The fourth quarter of 2021 saw trade in goods and services finally returning to pre-pandemic levels
Now the sad part: The growth in global trade in 2022 will be lower than it was last year.
Earlier, the International Monetary Fund too had cut its world economic growth forecast for 2022 by 0.5 points (from 4.9 to 4.4.) due to inflation in the US and concerns related to China’s real estate sector.
Trade has been integral to economic development for centuries as it can significantly reduce poverty by spurring economic growth, creating more remunerative jobs, broadening choices for consumption and enabling innovations and acquisition of technologies. This is why UNCTAD’s report is important.
The UN body pointed to data showing that trade in services finally returned to its pre-pandemic levels in the fourth quarter (Q4) of 2021, while trade in goods remained strong, increasing by almost $200 billion, to about $5.8 trillion, a new record.
A growth in services is what emerging economies like India are banking on, especially because the service sector took a knock in the wake of the lockdowns following COVID-19 and many were rendered without a job.
UNCTAD also noted that poorer nations’ exports outpaced their richer counterparts in the last quarter of 2021, compared with Q4 2020 (by 30 per cent versus 15 per cent).
But last year’s economic drivers are likely to “abate”, the UN body, which offers technical advice to developing countries to access the globalized economy, said. This is the reason why it feels that 2022 is set to see less growth than what was seen in 2021.
This means that “trade growth will continue to slow during Q1 2022” and then “normalize during 2022”, UNCTAD said, before pointing to “persistent inflation” in the US and “concerns” over China’s real estate sector.
Global supply chains – one of the key elements of the worldwide trade puzzle – will also continue to face negative pressures created by the COVID-19 pandemic, according to UNCTAD.
Image: World Bank / Dominic Chavez