Adedapo Adesanya
By Adedapo Adesanya
The UN Trade and Development (UNCTAD) has warned that further growth deceleration could be expected this year following the global economic slowdown experienced in 2023.
In 2023, the global economy grew by 2.7 per cent, but international trade in goods decreased by 1 per cent. Although there has been some recovery in 2024, it’s unlikely that the merchandise trade will be a significant driver of growth this year.
Looking to 2024, in its latest report, UNCTAD said market expectations for lower interest rates have raised hope for mitigating the pressure on private and public budgets worldwide.
However, the report said monetary policy alone cannot provide solutions to key global challenges, pointing to the ongoing crises linked to sovereign debt, ever-growing inequalities, and climate change.
The agency underscored the need for concerted multilateral action, along with a balanced policy mix of fiscal, monetary, demand-side and investment-boosting measures to achieve financial sustainability, create jobs, and improve income distribution.
UNCTAD also warned that real wages were still below pre-pandemic levels noting that most advanced economies’ central banks have aggressively raised interest rates since early 2022 to combat inflation. However, this approach didn’t fully consider supply chain issues from COVID-19 and increased market dominance, leading to higher prices and profits.
In 2023, despite stable employment, inflation decreased, indicating that supply-related issues, not just demand, contributed to earlier inflation. The report also found no evidence of a feared cycle where rising wages drive up prices, with real wages still below pre-pandemic levels and lagging behind productivity growth.
The UN agency warned that rising protectionism, disrupted maritime routes due to geopolitical tensions and climate change threaten global trade.
“These risks not only hamper economies but also imperil concerted multilateral solutions at a time when international trade collaboration is needed more than ever,” the report said.
Global maritime trade routes, crucial for the world’s commerce, are facing increasing challenges. Most recently, escalating attacks on ships in the Red Sea since November 2023 have been compounding already existing disruptions in the Black Sea caused by the war in Ukraine. Additionally, climate-induced drought is affecting trade through the Panama Canal.
Despite some improvement, UNCTAD said subdued growth is expected in global merchandise trade this year.
“Prospects for services trade are relatively better,” it added.
Speaking on this, Ms Rebeca Grynspan, Secretary-General of UNCTAD, ahead of the Spring Meetings of the International Monetary Fund (IMF) and the World Bank where she will participate, strongly urged concerted multilateral action and a balanced policy mix underlining that global policy coordination remains the key to safeguarding the global economy amid shifting trade patterns, soaring debt, and mounting cost of climate change all of which disproportionately affect developing countries.
To restore trust in the multilateral system and prevent further fracture, the UN Trade and Development Secretary-General Grynspan raised two critical areas.
“We call for coordinated multilateral efforts to address the asymmetries of international trade and market concentration,” she said. “Borrowing countries need more fiscal flexibility to reach the Sustainable Development Goals. This can only be achieved through an inclusive and global reform of the global financial safety net.”
