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World trade in 2023 is declining, growing by only 1.7%. Thai exports are still shrinking continuously.
According to data from the World Trade Organization (WTO), the problem of the decline in global trade figures poses a significant risk to emerging markets.
World trade 2023
Amid economists’ concerns about a global recession, one signal that has begun to weigh on investors is a downturn in trade figures that poses significant risks to emerging markets.
As of April 2023, the World Trade Organization (WTO) estimates that the volume of global merchandise trade
In 2023, it expanded by just 1.7%, down from 2.7% in 2022. This is consistent with Citi data that showed global import volumes contracted in both 2022 and 2023. The WTO expects global trade to expand by 3.2% in 2024, but that estimate could be revised down.
Due to the current economic pressures, including political tensions, shrinking food supplies, and the impact of tight monetary policies by central banks in many countries.
In terms of Thai export figures, June 2023 contracted by 6.4%, which is the 9th consecutive month of contraction, resulting in a trade deficit of 6,307.6 million US dollars in January-June.
The Ministry of Commerce revealed that the export value growth rate between January and June 2023 of Taiwan, Singapore, Indonesia, India, Malaysia and Thailand were all negative at 18.1%, 10%, 8.8%, 8.7%, 8.4% and 5.4%, respectively.
David Lubin, Citi’s head of emerging markets economics, identifies three main reasons why trade has shrunk so far.
- Trade Hangover, a result of the lockdown measures during the COVID-19 pandemic, has caused consumption of goods to increase rapidly. When compared to the present, it is seen that demand has slowed down. Also, if we go back to that period, the United States and its Western allies used the policy of “giving away money” to stimulate demand for goods from the public, in contrast to China, which used the policy of bringing workers back into factories to increase supply while trading partners accelerated demand. Therefore, the trade figures have increased.
- In developed countries, people turn to buying “services” instead of “goods”.
- China’s slowing economic growth, declining consumer confidence and much of its spending recovery have been concentrated in services rather than investment spending, which is often supported by the government.
Lubin said the lackluster global economic growth of around 3% in both 2023 and 2024 was a clear drag on trade volumes.
This is considered a slowdown in growth compared to 2022, which expanded by 3.5%. Importantly, the slowdown in global gross domestic product ( GDP) figures will significantly pressure global trade and demand.
The world is currently nearing the peak of globalization , with exports accounting for 15% of world GDP in the early 1980s, according to the IMF.
While globalization pushed the ratio to 25% of GDP during the 2008 financial crisis, it has fallen steadily to 20% of GDP during the COVID-19 pandemic.
Another factor indicating a global trade recession is the relationship between trade growth and global GDP growth. Trade growth rates from 2010 to 2020 were, on average, lower than global GDP growth rates for the first decade since World War II.
The WTO forecasts that trade growth will again fall below GDP growth in 2023 amid protectionist policies, geopolitical turmoil and a greater focus on local supply chains.
Moreover, economists have started to sound the alarm about the impact of climate change, especially El Nino, which could affect production and exports.
Source of information: Bangkok Business
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