The downturn is due to geopolitical tensions and export underperformance from developing nations, according to a report

Global trade will contract by 5% in 2023 compared to last year, the United Nations Conference on Trade and Development (UNCTAD) reported this week, expressing a generally negative outlook for 2024.

According to the UNCTAD’s estimates, world commerce is expected to amount to approximately $30.7 trillion this year. The UN body projected a decrease in goods trade by about $2 trillion, or 8%, while trade in services is anticipated to grow by approximately $500 billion, or 7%.

The UNCTAD attributed the decline in global trade partly to export underperformance from developing countries, as well as geopolitical issues.

“The war in Ukraine, the sanctions on the Russian Federation, and the de-risking in the US-China trade relationship are playing a significant role in shaping key bilateral trade trends,” the report said. “These factors not only impact the economies directly involved but also indirectly influence [the] trade dynamics of other economies.”

According to the trade body, high interest rates in some economies have also impeded commercial activity.

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The UNCTAD’s forecast for international trade in 2024 remained “highly uncertain and generally pessimistic.”

“While certain economic indicators hint at potential improvements, persistent geopolitical tensions, high levels of debt, and widespread economic fragility are anticipated to exert negative influences on global trade patterns,” the trade body wrote in summary.

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