International trade growth is forecast to stagnate this year as countries have raised interest rates to combat surging inflation, leading to a worldwide economic slowdown, says global logistics company DHL.
According to the Global Connectedness Index 2022, the global trade volume in goods reached 10% above the pre-pandemic level in the middle of last year, despite advanced decoupling between the US and China.
"The decoupling between these two countries has not yet led to a broader fragmentation of global flows between rival blocs of countries," the report noted.
John Pearson, chief executive of DHL, said the index data clearly debunks the perception of globalisation reversing as international flows have been resilient amidst headwinds, such as the pandemic and the Russia-Ukraine conflict.
A recent forecast by the International Monetary Fund indicated trade volumes would grow only 2.4% in 2023, down from a pre-war prediction of 4.9%. S&P Global projected real trade growth in goods at 0.6%, with positive trade growth during the second half of the year.
"The slower trade growth is largely caused by countries raising interest rates to combat a surge in inflation. Other factors that weighed on trade growth include high energy costs and Covid-19 outbreaks in China, which led to some supply disruptions," according to the report.
The report found the volume of world trade in goods and services grew 5.4% in 2022, exceeding the 3.4% expansion of global GDP in the same period. Ocean freight rates and port congestion also recovered to roughly pre-pandemic levels by late last year.
Cross-border e-commerce growth, accelerated by the pandemic, picked up from 9% in 2019 to 24% in annual sales in 2020, according to the Statista Digital Market Outlook.
The Netherlands ranked No.1 in terms of the world's 55 most globally connected countries, followed by Singapore in terms of the size of international flows relative to domestic activities. The UK, meanwhile, had the most globally distributed flows, the index showed.
"It remains an open question whether trade patterns will become significantly more regionalised in the future," said Steven Altman, senior research scholar at NYU Stern Center for the Future of Management.
"The benefits of long-distance trade are still important, especially as inflation remains high, economic growth has slowed, and container shipping rates have come back down."
