UN Trade and Development says the recessionary trend is linked to escalating trade tensions and uncertainty.
The world economy is on a recessionary trajectory, driven by
escalating trade tensions and persistent uncertainty, UN Trade and Development
(UNCTAD) alerts in its new report, “
Trade and Development Foresights
2025 – Under pressure: Uncertainty reshapes global
economic prospects”.
While global
trade reached a record $33 trillion last year, the outlook for
2025 remains uncertain.
The reports says developing economies like Uganda face risks and
worsening external conditions, but growing South-South trade and greater
regional economic integration are opportunities.
The
question however is that when developing countries trade among themselves, what
kind of tariffs will they apply to each other.
Luz
María de la Mora, Director of UNCTAD’s Trade Division says it just makes sense
for those countries to ensure that they make conditions that foster economic
activity among themselves.
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She
warns against a rise in protectionist measures similar to what President Donald
Trump announced recently.
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UN Trade and
Development (UNCTAD) calls for greater international policy coordination and
strengthened regional trade.
It has also
suggested that vulnerable and small economies, whose activities
have a negligible effect on trade deficits, should be exempt from new tariff
hikes because they are grappling with low growth and mounting uncertainty,
In
another
report released on 14 April, UN Trade and Development
(UNCTAD) is amping up calls that the poorest and most vulnerable economies be
exempt from “reciprocal tariffs”.
Such
tariffs, currently on pause for 90 days, were calculated at rates to balance
bilateral merchandise trade deficits between the United States and 57 of its
trading partners.
The
report, entitled “Escalating tariffs: The impact on small and vulnerable
economies”, finds that in many cases, reciprocal tariffs risk devastating
developing and least developed economies, without significantly reducing US
trade deficits or increasing revenue collection.
Most vulnerable economies at risk
The
57 trading partners concerned – 11 of them
least
developed countries – contribute minimally to US trade
deficits, UN Trade and Development notes.
The
spectre of low growth
Despite a slightly stronger-than-expected growth performance
of 2.8 per cent in 2024, the global economy is set to slow down in 2025.
UNCTAD estimates that the world gross product will expand by
only 2.3 per cent in 2025, below the threshold of 2.5 per cent – a marker of a
global recessionary phase.
This is a significant deceleration compared to the average
annual growth rates registered in the pre-pandemic period, which itself was a period
of subdued growth globally.
Global trade tensions escalate
Rising
trade tensions are impacting global trade, with UNCTAD noting that recent
tariff measures are disrupting supply chains and undermining predictability.
“Trade policy uncertainty is at a historical high,” the report notes, “and this
is already translating into delayed investment decisions and reduced hiring.”
Already
accounting for about one third of global trade, “the potential of South-South
economic integration offers opportunities for many developing countries”, the
report notes.
Policy options
UNCTAD
urges dialogue and negotiation, alongside stronger regional and global policy
coordination, building on existing trade and economic ties.
“Coordinated
action will be essential to restore confidence and keep development on track,”
the report concludes.
Global
macroeconomic outlook
The outlook for the global economy is increasingly worrying.
The initial optimism at the beginning of 2025 regarding a dynamic expansion of
the economy in the United States – largely driven by expectations of a
short-term boost from corporate tax cuts, deregulation measures and monetary
easing – is tempered by the abrupt shifts in trade and immigration policies,
which are already generating significant negative supply shocks.
