UNCTAD: World economy on a recessionary trajectory

The United Nations Conference on Trade and Development (UNCTAD) has released a report projecting a slowdown of the global economy to 2.3% in 2025, citing the escalating trade tensions and uncertainty caused by reciprocal tariffs. According to Luz Maria De La Mora, the Director of International Trade and Commodities at UNCTAD, these tariffs are disrupting the growth prospects, particularly for developing countries heavily reliant on trade. The report highlights that trade policy uncertainties are at historical highs and emphasizes the need for reassessing and updating international trade rules to facilitate economic growth and development. De La Mora underscores the importance of certainty, rules, and multilateral dialogue in leveraging trade as a tool for prosperity. The impact of the ongoing trade tensions on the least developed countries could have long-term effects on economic diversification and industrialization efforts. Tariffs may limit market access and opportunities in the short term, leading to trade diversion and necessitating a restructuring of supply chains. Developing countries may need to realign their strategies to fit into evolving trade patterns, potentially focusing on regional supply chains. De La Mora stresses the significance of understanding current dynamics to provide certainty for economic diversification and industrialization. Amidst the trade uncertainties, the importance of regional integration and South-South trade is underscored. De La Mora highlights the growing trend of trade among developing countries, which accounts for nearly one-third of global trade. She points out the complementarities in various sectors and the potential for strengthening rules such as the generalized system of tariff preferences to enhance intra-developing country trade. Policy coordination and regional trade agreements are highlighted as key components to foster deeper integration and create favorable environments for trade and investments. In terms of policy options, De La Mora emphasizes the need for trade policy coordination regionally and the importance of upholding the existing international trading system while updating and reforming its rules. She encourages countries to leverage regional trade agreements and mechanisms like the Africa Continental Free Trade Area to liberalize trade and provide transparent regulations for investors, exporters, and consumers. The UNCTAD analysis emphasizes that trade is a driver of growth, requiring certainty, dialogue, and consensus building to ensure smooth operations. As the global economy navigates through uncertain trade landscapes, the call for collaborative efforts, updated rules, and inclusive dialogue resonates strongly. The UNCTAD report serves as a stark reminder of the potential repercussions of ongoing trade tensions and the imperative for collective action to steer the world economy away from a recessionary trajectory.