UNCTAD’s “Trade and Development Foresights 2025” Report

UNCTAD recenty released a report titled “Trade and Development Foresights 2025 – Under Pressure: Uncertainty Reshapes Global Economic Prospects”. According to the report, growth is expected to decline to just 2.3 per cent. This marks a stark contrast to pre-pandemic growth rates. Various factors contribute to this downturn, including rising trade tensions, financial volatility, and increasing uncertainty.

Global Growth Projections

Global growth is forecasted to fall below the 2.5 per cent threshold, often associated with recessionary conditions. This slowdown is a sharp decline from the sluggish average growth rates seen before the pandemic. Economic conditions are deteriorating, particularly for vulnerable economies.

Economic Policy Uncertainty

The Economic Policy Uncertainty Index reached its highest levels this century in early 2025. Concerns about shifting trade policies have led to financial turbulence. The US stock market’s “fear index,” which measures volatility, has also spiked, indicating rising investor unease. It reached the third-highest level in history, after 2008 and 2020.

Declining Trade Dynamics

• Late 2024 trade growth was temporary – driven by advance ordering before new tariffs.

• Freight rates fell by 40% (Jan–Mar 2025), indicating a sharp decline in global trade activity.

• Trade policy uncertainty is at an all-time high, leading to:

  • Investment delays

  • Replanning of supply chains

  • Lower hiring and confidence

Trade Policy Uncertainty

Trade policy uncertainty is at historic highs, impacting business confidence and long-term planning. Manufacturers and investors are postponing decisions and reassessing supply chain strategies due to the unpredictable economic landscape.

Development Finance Challenges

Development finance is under severe pressure. Official development assistance (ODA) is declining, while social spending is shrinking. Preliminary estimates suggest an 18% drop in ODA from major donors between 2023 and 2025, jeopardising progress towards the Sustainable Development Goals.

Crisis for Developing Countries

• Many developing countries face a “perfect storm”:
  • High debt,
  • Weak growth,
  • Costly borrowing.
• 35 out of 68 low-income countries are in or near debt distress.
• High debt servicing is taking funds away from crucial needs like health and education.
• Investors prefer putting money in safer developed markets, reducing capital flows to poorer nations.

South–South Trade

• South–South trade (among developing nations) now makes up ~1/3 of global trade.
• This trade is growing faster than global average, especially within East and Southeast Asia.
• Regional trade cooperation may help buffer shocks from the global economy.

 UNCTAD Recommendations

1. Coordinate regional and international policies to stabilize trade and finance.
2. Boost multilateral cooperation to support vulnerable economies.
3. Promote trade among developing nations for economic resilience.
4. Shift fiscal priorities:
   • Reduce military spending
   • Increase investment in infrastructure, climate action, and social protection.
5. Align policies with long-term development goals.

Month: Current Affairs - April, 2025

Category: Economy & Banking Current Affairs