Global Trade in 2023 Declines, Growing Only 1.7%, While Thai Exports Continue to Contract
August, 22 2023
Amid growing concerns among economists regarding a potential global recession, one significant stress point for investors is the ongoing decline in global trade, which poses substantial risks to emerging markets.
According to data from April 2023, the World Trade Organization (WTO) projected that global merchandise trade volume would grow by only 1.7% in 2023, down from 2.7% in 2022. Citi's data also indicates that global imports contracted throughout 2022 and 2023. While WTO forecasts global trade growth to reach 3.2% in 2024, this estimate remains uncertain due to economic pressures, including geopolitical tensions, food supply constraints, and the impact of tighter monetary policies implemented by central banks worldwide.
Thailand’s export figures for June 2023 contracted by 6.4%, marking the ninth consecutive month of decline. This downturn led to a trade deficit of $6.3 billion for January–June 2023. The Ministry of Commerce reported that export value growth for the first half of 2023 in Taiwan, Singapore, Indonesia, India, Malaysia, and Thailand all recorded negative rates of -18.1%, -10%, -8.8%, -8.7%, -8.4%, and -5.4%, respectively.
David Lubin, Head of Emerging Markets Economics at Citi, identified three primary reasons for the ongoing global trade contraction:
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Trade Hangover – The lockdown measures during the COVID-19 pandemic led to a surge in goods consumption. During that period, Western nations implemented stimulus policies, boosting consumer demand, while China focused on reviving supply by bringing workers back to factories. This dynamic caused trade volumes to rise. However, demand has now slowed significantly.
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Shift from Goods to Services – In developed economies, consumers have increasingly shifted their spending from physical goods to services.
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China’s Slowing Economy – Weakened consumer confidence in China and a concentration of spending in the service sector, rather than investment-driven growth supported by government policies, have contributed to the trade slowdown.
Lubin further projected that global economic growth, estimated at around 3% in both 2023 and 2024, would exert downward pressure on global trade volumes. This represents a slowdown compared to 3.5% growth in 2022. The contraction in global GDP is expected to significantly impact trade and overall global demand.
Additionally, globalization appears to be nearing its peak. According to IMF data, exports accounted for 15% of global GDP in the early 1980s. This figure peaked at 25% during the 2008 financial crisis but has since declined to around 20% during the COVID-19 pandemic.
Another indicator of global trade recession is the relationship between global trade growth and GDP growth. From 2010 to 2020, global trade expansion consistently lagged behind GDP growth for the first time since World War II. WTO forecasts suggest that this trend will persist in 2023, driven by trade protectionist policies, geopolitical disruptions, and an increasing emphasis on localized supply chains.
Economists are also raising concerns about climate-related factors, particularly El Niño, which could impact agricultural yields and exports.