After declines over several quarters, international trade is poised for a rebound this year, the United Nations Conference on Trade and Development's (Unctad's) latest 'Global Trade Update' states.

The report details a 3% year-on-year contraction in global trade in 2023, on the back of lower trade in goods, but higher trade in services.

The services sector showed resilience with a $500-billion, or 8%, increase from the previous year, while trade in goods experienced a $1.3-trillion, or 5%, decline compared with 2022.

Preliminary figures indicate the contraction in global trade in 2023 was driven primarily by subdued demand in developed nations and weaker trade within East Asia and Latin American regions.

The fourth quarter of 2023 marked a departure from previous quarters, with both merchandise and services trade stabilising quarter-on-quarter. Developing countries, especially those in the African, East Asian and South Asian regions, experienced growth in trade during this period.

The available data for the first quarter of this year suggests a continued improvement in global trade, especially considering moderating global inflation and improving economic growth forecasts, Unctad notes.

Additionally, rising demand for environmental goods, particularly electric vehicles, is expected to bolster trade this year, it adds.

"However, geopolitical tensions and supply chain disruptions persist as pivotal factors influencing bilateral trade trends and require ongoing scrutiny.

"Disruptions in shipping routes, particularly those related to security issues in the Red Sea and the Suez Canal, as well as adverse climate effects on water levels in the Panama Canal, carry the potential to escalate shipping costs, prolong voyage times and disrupt supply chains," Unctad says.

Towards the end of 2023, trade in goods saw growth in several major economies, including China, which increased imports by 5%, and India, which increased exports by 5%, although trade in goods declined for the Russian Federation and the European Union.

Further, during 2023, trade performance diverged between developing and developed countries, with the developing economies experiencing a decline of approximately 4% and developed economies a decline of around 6%.

South-South trade, or trade between developing economies, saw a steeper decline of about 7%.

However, these trends reversed in the last quarter of 2023, with developing countries and South-South trade resuming growth while trade in developed countries remained stable, the agency notes.

Regionally, trade between African economies bucked the global trend by increasing 6% in 2023, whereas intra-regional trade in East Asia, which decreased by 9%, and Latin America, which decreased by 5%, lagged behind the global average.

"Geopolitical tensions continued to impact bilateral trade flows, as shown by the Russian Federation reducing its trade dependence on the European Union while increasing its reliance on China.

"Additionally, trade interdependence between China and the US decreased further in 2023," Unctad says.

Meanwhile, at the sectoral level, most industries experienced declines in trade value. Sectors like apparel, chemicals and textiles saw significant declines in 2023.

Sectors that bucked this include pharmaceuticals, transportation equipment - largely owing to increased demand for wide-body aircraft - and motor vehicles, which grew by 14%, primarily fuelled by the demand for electric vehicles.

Among services, tourism and travel-related services showed the strongest rebound, increasing by almost 40% last year.

However, most sectors rebounded in the fourth quarter of 2023, except for apparel, where trade further contracted, Unctad points out.