The Role of Global Trade in Countries Current Account
The Role of Global Trade in Countries Current Account
September 8, 2022
Entrepreneur's Roadmap to Global Trade
Entrepreneur’s Roadmap to Global Trade
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As the value of global trade increased through each quarter of 2021, growth continued strongly. Growth in trade extended beyond just commodities. Through 2021, trade in services also increased significantly, eventually reaching pre-pandemic levels in Q4 2021.

Global trade overall increased by nearly 25% compared to 2020 and by around 13% compared to the pre-pandemic level of 2019 to reach a record high of about US$ 28.5 trillion in 2021. While the first half of 2021 saw most of the growth in global commerce, growth persisted in the second half. After a third quarter that saw trade growth somewhat restricted, it managed to pick up again in the fourth quarter of 2021, when the value of international commerce increased by about 3% from the third quarter.

Similar trends emerged in the trade of products and services in 2021, with faster growth during the first half of the year.

during the year. In Q3 2021 and notably in Q4 2021, trade growth remained favorable for both products and services.

The value of products traded surged by about US$ 200 billion in Q4 2021, setting a new high of US$ 5.8 trillion.

During the same time frame, trade in services increased by almost US$ 50 billion, reaching a value of US$ 1.6 trillion, barely beyond pre-pandemic levels. Trade in products surpassed trade in services significantly on an annual basis, with a gain of approximately

In comparison, they are 27% and 17%.

According to the UNCTAD nowcast, trade growth will sluggishly continue in the first quarter of 2022. Although only slightly, positive growth rates are anticipated for both goods and services trade, maintaining trade values at levels comparable to Q4 2021.

Global trade outlook

The rise in global trade in 2021 was mostly driven by rising commodity prices, easing pandemic restrictions, and a solid recovery in demand as a result of incentives. International trade trends are anticipated to return to normal in 2022 as these trends are likely to fade. Overall, the following variables are likely to have an impact on how global trade growing in 2022:

slower than expected economic growth

Forecasts for economic growth in 2022 have been reduced. For instance, the International Monetary Fund reduced its estimate of global economic growth for 2022 by 0.5 percentage points (from 4.9 to 4.4) due to ongoing inflation in the United States and worries about China’s real estate market. With less trade growth than anticipated, it is likely that global trade trends will mirror these macroeconomic developments.

Persistent difficulties with global supply chains

The COVID-19 epidemic put supply chains under unbelievable pressure. Supply shortfalls and soaring shipping costs have also been made worse by operational problems, a technology shortfall, and rising energy prices. As a result, big corporations have intensified their efforts to increase supply network reliability and manage risks, although delays continue to occur. Shortening supply chains and diversifying suppliers may have an impact on international trade trends in 2022.

Trade agreements and regionalization trends

The Regional Comprehensive Economic Partnership (RCEP) went into effect on January 1, 2022. Many of the economies in East Asia and the Pacific may now trade more easily thanks to this trade agreement, which is also expected to enhance commerce amongst members significantly by diverting trade from non-member countries. In accordance with other regional initiatives (such as the African Continental Free Trade Area) and in part because of a growing reliance on suppliers who are located nearby, it is also anticipated that trade flows would become more regionalized in other parts of the world.

Moving toward a greener, global economy

In 2022, trade patterns are anticipated to reflect the rising global demand for ecologically sustainable goods. Government laws governing the trade of high-carbon goods may potentially facilitate such trends.

Additionally, the increasing demand for crucial commodities needed to enable cleaner energy sources may have an impact on global trade patterns.

Rising concerns about the sustainability of debt

Concerns over debt sustainability are projected to grow in the coming quarters due to mounting inflationary pressures given the high levels of global debt. A considerable tightening of financial conditions would increase pressure on the governments with the highest levels of debt, increasing weaknesses and harming international trade and investment flows.

The major economies’ trade trends

The import and export patterns of several of the world’s largest trading economies further highlight the trends in recent quarters’ trade growth. Trade in goods in all major economies was significantly higher in Q4 2021 than it was before the outbreak in 2019. for exports as well as imports. Negative quarter-over-quarter rates show that some exporters reversed the upward trends. in Q4 2021 of the major economies. However, export growth in this time frame was still robust for China, the United States, and the Republic of Korea. In contrast, positive import trends persisted.

It takes one quarter for data on services to be released. The majority of the world’s main economies’ trade in services in Q3 2021 was still much lower than pre-pandemic 2019 levels. Quarter-over-quarter rates, however, indicate that, with the exception of Japan, all major economies had a significant recovery in the services sector in Q3 2021.

Regional trade trends

In terms of goods, trade in goods increased more for developing countries than for developed countries in Q4 2021. The exports of emerging nations were almost 30% higher in Q4 2021 than in Q4 2020. This percentage is roughly 15% in wealthy nations in comparison. Additionally, South Asian trade growth surpassed global trade in Q4 2021, increasing by around 32% when compared to Q4 2020 and by about 38% when East Asian economies are not included. Comparing Q4 2021 with pre-pandemic levels reveals similar trends.

Even though they were slower in Europe, North America, and East Asia, trade growth rates in Q4 2021 were still quite good throughout all geographical areas. Due to rising commodity prices, export growth has been generally stronger in regions that export commodities.

However, all economic sectors showed a significant year-over-year gain in the value of their trade-in Q4 2021, with the exception of transport equipment. The significant increase in the value of trade in the energy industry is a result of high fuel costs. Metals and chemicals saw above-average trade growth as well. The global shortage of semiconductors had a muted effect on Q4 2021 trade growth in communication equipment, automobiles, and precision instruments.

Writer Shakir Ali Rajput: Global Trade Professional, For additional information, please contact me at WhatsApp (00971) 543785186 or email address.

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