Image: WAM/ For illustrative purposes
Global trade is set to hit a historic high of nearly $33tn in 2024, marking a $1tn increase from the previous year, according to the latest Global Trade Update from the United Nations Conference on Trade and Development (UNCTAD).
This 3.3 per cent annual growth underscores the resilience of global trade, driven by a robust rise in services trade and a moderate increase in goods trade. However, while growth is strong, significant challenges lie ahead, particularly for developing economies facing slower trade growth and persistent geopolitical risks.
The anticipated surge in global trade is largely attributed to a 7 per cent increase in services trade, which has contributed an impressive $500bn to overall growth. Services trade is now recognised as a key pillar of global economic expansion, with countries increasingly integrating digital, financial, and other high-value services into their trade portfolios.
In contrast, trade in goods has grown more slowly, expanding by only 2 per cent in 2024. Despite the positive momentum, goods trade remains below its 2022 peak, reflecting both challenges in traditional industries and structural shifts in global trade patterns.
“The strength in services trade highlights a pivotal shift in the global economy, with services becoming an increasingly dominant force in driving trade growth,” said UNCTAD in its report. “While goods trade remains critical, services offer new avenues for diversification and growth, especially for developing economies looking to innovate and compete on the global stage.”
Challenges for developing economies
While global trade continues to expand, developing economies are facing headwinds. In 2024, imports in these economies contracted by 1 per cent, and South-South trade (trade between developing countries) fell by the same margin during the third quarter.
On the other hand, developed economies led the charge in the third quarter, posting a 3 per cent rise in imports and 2 per cent growth in exports, indicating their stronger position in the global trade landscape.
Despite these challenges, there are opportunities for developing economies to tap into high-growth sectors. ICT and apparel have emerged as standout performers in the third quarter of 2024, with trade in these sectors increasing by 13 and 14 per cent, respectively. These sectors offer an opportunity for economies to diversify away from traditional industries and build resilience through technology-driven solutions and value-added products.
Global trade: Traditional sectors struggling
However, not all sectors are performing equally well. Energy trade has been under significant pressure, contracting by 2 per cent in Q3 and 7 per cent for the year, reflecting ongoing fluctuations in energy demand and prices. Similarly, the metals sector saw a 3 per cent decline in both quarterly and annual trade.
The automotive sector also faced a 3 per cent decline in Q3, although it is expected to end the year with a modest 4 per cent growth, reflecting recovery from previous downturns.
These declines in traditional sectors underscore the risks faced by economies reliant on energy, metals, and automotive industries. For developing economies, this calls for a strategic shift towards more resilient and innovative sectors.
Strategic recommendations: Diversification and resilience
In light of these mixed results, UNCTAD urges developing economies to adopt targeted policies that can enhance trade diversification and reduce over-reliance on traditional sectors. The organisation recommends that these economies focus on building up high-value industries like ICT and apparel, which have shown significant promise in recent months.
“Trade diversification is essential for building long-term resilience,” said UNCTAD’s Global Trade Update. “Developing economies must adapt to new global trends by investing in sectors that are poised for growth, such as digital technologies, green industries, and value-added manufacturing.”
Window of opportunity for 2025
Looking ahead to 2025, the global trade environment is expected to remain volatile, with risks from ongoing geopolitical tensions and the potential for trade wars. However, easing inflation and stable global growth forecasts offer a window of opportunity for developing economies to strengthen their trade position and tap into high-growth sectors. Strategic investments in emerging industries, combined with policy reforms to foster innovation and sustainability, can help mitigate risks and ensure continued growth in an increasingly complex global marketplace.
While global trade is on track to reach new highs in 2024, the focus will soon shift to the coming challenges and the need for strategic action by governments and businesses alike. For developing economies, 2025 could be a pivotal year, one that determines whether they can leverage global trade opportunities or become more vulnerable to external shocks.
As global trade continues its upward trajectory, it will be essential for both developed and developing economies to work in unison to strengthen global supply chains, reduce dependencies, and build a more resilient global economy that can withstand future disruptions.
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