The latest edition of United Nations Conference on Trade and Development’s (Unctad’s) ‘Global Trade Update’ says global trade reached a record high in 2021, but is expected to slow in the first quarter of 2022.

The organisation warns that delays will persist in global supply chains this year.

Global trade totalled more than $28-trillion in 2021, an increase of almost 13% compared with pre-pandemic levels.

The bulk of global trade took place in the first half of last year, and slowed down in the third quarter before picking up again in the fourth quarter.

During the fourth quarter of the year, trade in goods increased by almost $200-billion to reach $5.8-trillion – which is a new record. At the same time, trade in services rose by about $50-billion to reach about $1.6-trillion.

On a year-on-year basis, trade in goods strongly outperformed trade in services, with increases of 27% and 17%, respectively.

Trade in goods increased more strongly for developing than for developed countries in the fourth quarter of 2021, at about 30% higher year-on-year in the quarter, while trade in goods in developed countries increased by 15% year-on-year.

The organisation points out that trade growth between developing countries (South-South) outpaced global trade during the fourth quarter, with an increase of about 32% year-on-year, and with an increase of about 38% when excluding East Asian economies.

Unctad explains that the positive trend for international trade in 2021 was largely a result of higher commodity prices, lower pandemic restrictions and a strong recovery in demand for goods and services owing to economic stimulus packages.

For this year, the organisation expects global trade trends to reflect macroeconomic trends – including persistent high inflation in the US and concerns related to China’s real estate sector – and likely experience lower-than-expected trade growth.

Unctad also expects trade patterns to reflect the increasing global demand for products that are environment-friendly. Such patterns may be supported by government policies regulating the trade of high-carbon products.

Global trade patterns could also be influenced by increased demand for strategic commodities required to support greener energy alternatives, such as cobalt, lithium and rare earth metals.

Moreover, Unctad expects regional trade to increase as the Regional Comprehensive Economic Partnership became effective on January 1. This trade agreement facilitates trade among many of the East Asian and Pacific economies, and is expected to significantly increase trade between members, including by diverting trade from non-member countries.

The regionalisation of trade flows is also expected to increase in other parts of the world in line with other regional initiatives (such as the African Continental Free Trade Area) and also owing to increasing reliance of geographically closer suppliers.

Given the record levels of global debt, concerns about debt sustainability are likely to intensify in the coming quarters as a result of mounting inflationary pressures.