T RADE AND DEVELOPMENT R E P O R T U P DAT E
Global Trends and Prospects
APRIL 2023 (c) 2023, United Nations Conference on Trade and Development
The findings, interpretations and conclusions expressed herein are those of the authors and do not
necessarily reflect the views of the United Nations or its officials or Member States.
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expression of any opinion whatsoever on the part of the United Nations concerning the legal status of
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This publication has not been formally edited.
UNCTAD/GDS/INF/2023/1Table of contents
A. INTRODUCTION.................... 1
B. WEAKENING GROWTH OUTLOOK AGAINST MOUNTING FINANCIAL STRAINS....... 2
1. Bailing out better? ............. 2
2. Global growth and trade............ 5
3. Regional prospects............. 10
C. INFLATION WOES: THE LIMITS OF MONETARY TIGHTENING........... 14
1. Hungry for profits: food prices and the cost-of-living crisis ........ 20
D. CHRONICLE OF A DISASTER FORETOLD: DEBT AND DEVELOPMENT DISTRESS
IN 2023 AND BEYOND................. 24
1. Developing country debt dynamics under unfavourable monetary
conditions .................. 24
2. From debt distress to development crisis........ 27
3. Towards a new debt architecture............. 30
E. LOSS AND DAMAGE IN A TIME OF POLYCRISIS........ 31
1. Pakistan: in the eye of the polycrisis............... 31
2. The role of loss and damage financing........... 32
3. Existing financing for loss and damage .......... 33
REFERENCES ................. 34
iii TRADE AND DEVELOPMENT REPORT UPDATE
April 2023
List of figures
1. World merchandise trade, January 2010–January 2023 ............ 8
2. Global supply chain pressure index (GSCPI), January 1998–February 2023 .... 9
3. Consumer price index, selected economies, January 2020–January 2023 ..... 16
4. Deflators for Germany, Italy and the United Kingdom, first quarter of 2019–fourth
quarter of 2022 ................. 18
5. Deflators for Indonesia and Poland, first quarter of 2019–fourth quarter of 2022.... 20
6. International price indices of fertilizer and food, January 2018–January 2023........ 21
7. Median food traders’ profits and revenues, 2018–2022....... 22
8. Total global commodity trading gross margin, 2018–2022......... 23
9. Bond and equity emerging market fund flows, 2017–2023......... 25
10. Sovereign bond market indicators, 1 January 2019–17 March 2023........ 26
11. Net resource transfers on external public debt in low- and middle-income
countries, 2012–2021............... 28
12. Change in public external debt service and other key public spending,
2012–2014 and 2019–2021............ 29
13. Economy of Pakistan, selected indicators, 2015–2022........ 31
List of tables
1. World output growth, 1991–2023............ 6
2. CPI inflation rates and contributions, selected developed countries, 2018–2023..... 17
3. CPI inflation rates and contributions, selected developing countries, 2018–2023.... 19
List of boxes
1. Inflation targeting and the primacy of financial stability ............. 4
List of charts in boxes
B1. Effective federal funds rate, June 1976–February 2023....... 5
iv Global Trends and Prospects
A. INTRODUCTION
According to most recent data, the world economy grew by 3.1 per cent in 2022. To many, the rebound
suggested that a soft landing was possible in 2023, and that the key problems of the year 2022 – rising
prices, supply-chain disruptions and recession risks – have been addressed. As a result, the very first
months of 2023 were viewed with optimism by decision-makers, as it appeared that the anti-inflationary
stance of the central banks had set a path to price stabilization without causing a major disruption to
growth.
Trade and Development Report 2022 cautioned against such optimism because it was based on short-
term dynamics. Long-term issues which had emerged after the global financial crisis (GFC) of 2007–09
and gained greater visibility during the pandemic – weak investment, slow productivity growth, supply
chain vulnerabilities, high levels of indebtedness – remain in place. The ongoing war in Ukraine continues
to impact international markets for energy, food and commodities. Moreover, inflation is proving a
stubborn adversary due to persistent supply-side factors and excessive markups by large corporations,
particularly in food and energy markets.
With global growth decelerating during the fourth quarter of 2022, the world economy has begun
2023 in a more fragile state than the optimistic accounts were suggesting. With the conflict in Ukraine
continuing into 2023, major financial, investment and strategic decisions are clouded by geopolitical
uncertainty and risks of economic insecurity. The collapse of the crypto exchange FTX in November
2022 and a string of bank failures in Europe and the United States in March 2023, raise the spectre of
financial contagion in an already slowing economy.
How deep these financial stresses reach and how long they persist will determine whether advanced
economies slip back into recession in 2023. With long-term challenges remaining unaddressed, growth
is expected to decelerate to 2.1 per cent in 2023. This could set the world onto a recessionary track.
Concerted actions by governments in early 2023 and the initial reaction from markets suggest this is still
avoidable. However, the room for manoeuvre may be constrained given the heightened sovereign debt
levels not seen since the global financial crisis, the expansion of central bank balance sheets and the
growth of the large and unregulated shadow banking system. With the era of cheap credit coming to
an end at a time of “polycrisis” and growing geopolitical tensions, the risk of systemic calamities cannot
be ruled out.
The damage to developing countries from unforeseen shocks, particularly where indebtedness is already
a source of distress, will be heavy and lasting. Without the kind of financial safety net enjoyed by private
actors in advanced economies, the year ahead will be a challenging one even for those developing
countries not in immediate distress. In this sense, inequalities, both within and across countries, that
emerged with the lop-sided recovery from the pandemic, are likely to increase. Financial support and
rescue packages to failing lenders and enhanced swap lines in advanced economies reduce the threat
of a financial meltdown by offering a safer haven from financial turbulence. But they will tilt the scale of
financial flows further in advanced economies’ favour, as well as benefiting larger financial institutions
within their own markets.
Areas of policy concern for 2023
o It appears that the year 2023 will test the financial resilience of the post-pandemic world. While
it is difficult to predict the precise timing and contours of a financial crisis, if any, the first weeks
of spring 2023 do make it clear that in an interconnected and fragile world economy, central
bank decisions in advanced countries should not be taken without consideration of their wider
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