THE VALUE of global trade reached a record $7.7 trillion in the first quarter of 2022 but tightening policies and geopolitical frictions may bring the positive trend to an end, according to UNCTAD.
The latest global trade update from the United Nations Conference on Trade and Development indicates the value of international trade has increased by $1 trillion since the same quarter in 2021.
The latest figure represents a rise of around $250 million since the fourth quarter of 2021. UNCTAD said the growth is fuelled by rising commodity prices as trade volumes have increased to a much lower extent.
UNCTAD expects the trend to remain positive, however trade growth has continued to slow through the second quarter of this year.
“The war in Ukraine is starting to influence international trade, largely through increases in prices,” UNCTAD said in its report.
It noted that rising interest rates and the winding down of economic stimulus packages will likely have a negative impact on trade volumes for the rest of 2022.
According to the report, trade growth rates in the first quarter of this year remained strong across all geographic regions, although the rate were lower in East Asia and Pacific regions.
“Export growth has been generally stronger in commodity-exporting regions, as commodity prices have increased,” UNCTAD said.
It said merchandise goods trade reached around $6.1 trillion in this year’s first quarter, which is an increase of around 25% since the same time last year.
The most economic sectors recorded substantial year-over-year increases in the value of their trade, according to the report.
High fuel prices are reportedly behind the strong increase in the value of trade in the energy sector. Trade growth was also above average for metals and chemicals.
“By contrast, trade in the transportation sector and in communication equipment has remained below the levels of 2021 and 2019,” UNCTAD said.
The report suggested the evolution of world trade for the remainder of this year is likely to be affected by slower-than-expected economic growth due to rising interest rates, inflationary pressures and concerns over debt and sustainability in many economies.
“The war in Ukraine is affecting international trade by putting further upward pressure on the international prices of energy and primary commodities,” UNCTAD said.
“In the short term, because of the inelastic global demand for food and energy products, rising food and energy prices would likely result in higher trade values, and marginally lower trade volumes.”
Other factors expected to influence global trade this year are continuing challenges for global supply chains, regionalisation trends and policies supporting the transition toward a greener global economy.