By Eric Huang      Photo：Niklas Jeromin

In the post-epidemic period, although the global economy was affected by high inflation and Russia's invasion of Ukraine, which caused great damage to global container transportation in the second half of the year, based on the still strong demand in the first half of the year and the retaliatory consumption after the unblocking of various countries, it made global trades both in goods and services have shown impressive growth this year. According to the latest global trade dynamics released by The United Nations Conference on Trade and Development (UNCTAD) on December 13, global trade will reach a record US$32 trillion in 2022, but as geopolitical tensions and tight financial conditions persist, the economic slowdown since the second half of 2022 will be expected to worsen in 2023. UNCTAD estimates that the total global trade in 2022 will be US$32 trillion, of which trade in goods will be US$25 trillion and trade in services will be US$7 trillion. These estimates suggest that trade in goods will grow by 10 percent and trade in services by 15 percent compared to 2021.

The reasons behind these records are mainly due to strong demand growth in the first half of 2022. On the contrary, global trade growth will be greatly suppressed in the second half of 2022. According to UNCTAD compared with the second quarter of 2022, in the third quarter of 2022, trade in goods has decreased by 1%, while trade in services has increased by 1.3%. According to the latest assessment of current trade by UNCTAD, the value of global trade in both goods and services will decline sharply in the fourth quarter of 2022. Economic growth forecasts for 2023 have been revised down due to high energy prices, rising interest rates, persistent inflation in many economies, and negative spillover effects of the war in Ukraine on the global economy. Continued tightening financial conditions are expected to further increase pressure on indebted governments and negatively impact investment and international trade flows, while associated input goods with higher prices weaken demand for imports.

But trade volumes showed demand elasticity, suggesting that not all news was gloomy. Despite the slowdown in trade value, overall trade volumes continue to grow by 3% throughout 2022 — a signal of resilience in global demand, according to the UNCTAD report. Part of the decline in international trade in the second half of 2022 is due to lower prices for primary products. The report also highlights the positives of improved global supply chains, reduced port congestion, lower ocean freight rates, and new trade agreements such as the Regional Comprehensive Economic Partnership and the African Continental Free Trade Area. Port authorities and shipping lines have now adapted to the challenges posed by the COVID-19 pandemic, and while freight rates are still slightly higher than the pre-pandemic averages, the overall trend is downward.

Global supply chains are a reshaping of global supply chains through sourcing diversification, reshoring, and near-shoring, all of which are expected to impact trade in next year. International trade patterns will also reflect the move towards a green economy, with carbon-intensive commodities and fossil-fuel energy falling out of favor. The ongoing trade slowdown is expected to worsen in 2023, according to UNCTAD. While the outlook for global trade remains uncertain, the negatives appear to outweigh the positives for now, making international trade forecasts for 2023 very pessimistic.

Similarly, according to Bank of America's latest survey of 281 fund managers overseeing $728 billion in assets, 69% of fund managers expressed pessimism about the economic outlook in 2023. However, the report, published on December 12, also mentioned that concerns about inflation are fading, with a record 90% of respondents expecting prices to fall in the next 12 months. But the outlook for overall corporate profits remains bleak, with 91% of respondents expecting overall corporate profit growth to continue to deteriorate in 2023. Meanwhile, about three-quarters of respondents expect stronger economic growth in China as it reopens from COVID-19 restrictions, up from just 13% of managers in November who were optimistic about the country's economy. This is the most optimistic outlook forecast since May 2021. The Bank of America’s survey also found that persistently high inflation and a deep global recession were seen as the tail risks for next year. Other concerns include the actions of hawkish central banks, deteriorating geopolitics and systemic credit events.

All in all, for the shipping market in 2023, on the one hand, it has to fight against the sharp drop in cargo volume caused by the continued global economic downturn and inflationary pressure; on the other hand, it has to be busy solving the issue of high capacity-growth caused by the launching of new vessels that have been placed successively in the past two years. It seems that there will be a fierce battle in the shipping market next year!

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