UN report: Financial volatility intensifies impact on global trade

Geneva, December 2 (Xinhua) -- The United Nations Conference on Trade and Development (UNCTAD) released its 2025 Trade and Development Report on December 2, stating that financial volatility and geopolitical uncertainty are putting increasing pressure on global trade and investment. The global economic growth rate is expected to slow down to 2.6% in 2025, lower than the 2.9% in 2024.

Secretary General of the United Nations Conference on Trade and Development, Greenspan, stated that the analysis of the report indicates that financial conditions are increasingly determining the direction of global trade. Trade is not only a chain of suppliers, but also a chain of credit lines, payment systems, money markets, and capital flows

The report points out that over 90% of global trade relies on bank financing. The liquidity of the US dollar and cross-border payment systems are equally crucial for international trade activities. The deep dependence on financial channels closely links trade with global financial and monetary conditions. Changes in important interest rates or investor sentiment may affect global trade volume.

The report states that developing economies are expected to grow by 4.3% in 2025, with a significantly higher growth rate than developed economies. However, developing economies face higher financing costs, are more susceptible to sudden changes in capital flows, and bear increasing climate related financial risks. These factors limit the fiscal and investment space needed to sustain growth.

The report further explains that due to the small size of domestic financial markets, many developing economies have to rely on higher cost external borrowing. Their borrowing rates generally range from 7% to 11%, while the borrowing rates of major developed economies are only 1% to 4%.

The United Nations Conference on Trade and Development has put forward a series of pragmatic reform proposals to reduce financial fragility, improve predictability, and strengthen the synergies between trade, finance, and development. These suggestions include improving the multilateral trade dispute settlement mechanism, updating trade rules to adapt to the current economic situation, filling the gap in trade and investment statistics, reforming the international monetary system, and strengthening regional and domestic capital markets.