KUALA LUMPUR (Dec 14): Global trade is set to reach almost US$32 trillion (RM140.77 trillion) this year, but inflation has reversed some of the gains made in recent months, according to the United Nations Conference on Trade and Development (UNCTAD).

In a statement on its website on Tuesday (Dec 13), the UN agency said global growth “turned negative” during the second half of 2022.

The agency said that trade of goods is expected to reach US$25 trillion by year end, and that of and services at US$7 trillion.

It said the downturn began in the third quarter of the year, with goods trading about 1% lower than from March to May.

In its global trade update, the UNCTAD said that although services actually increased by 1.3% in the third quarter, both goods and services are expected to fall in value in the run-up to year end.

Demand for foreign goods “proved resilient” through 2022, the trade and development update said, with trade volumes overall increasing by 3%.

Trade volumes of east Asian economies have shown resilience, while South-South trade lagged during the third quarter.

Overall, “geopolitical frictions, persisting inflation, and lower global demand are expected to negatively affect global trade during 2023”, said the UNCTAD in its report highlights.

The UNCTAD said among the negative factors teased out are lower economic growth forecast through 2023, due to high energy prices, rising interest rates, sustained inflation in many economies, and the depressive impact of the war in Ukraine.

It said prices of components and consumer goods are expected to dampen demand for imports, and lead to a declining volume of international trade.

Record levels of global debt and increased interest rates “pose significant concerns for debt sustainability”, increasing pressure on those governments most in debt, and “amplifying vulnerabilities”,  it said.