Table of Contents

• UNCTAD Report: Global Financial Reform Crucial for Stable Development
  • • • A new UN Trade and Development report says reforms to global financial systems are essential to reduce vulnerability, improve predictability and foster better harmonization between trade, finance and development.
      • Globalization is being reshaped by geopolitics and political changes. The financial system must adapt to better serve the needs of the real economy.
      • Price volatility now poses a continuing challenge for trade, investment and development.
      • Financial shocks quickly ripple through the real economy, revealing gaps in the global economic architecture.
      • Developing economies are the engine of global growth, but they face the highest financial and climate risks.
      • Coordinated reforms linking trade, finance, debt and climate action can restore stability and refocus development.
  • Key takeaways
  • FAQ

• Globalization is being reshaped by geopolitics and political changes. The financial system must adapt to better serve the needs of the real economy.

• Price volatility now poses a continuing challenge for trade, investment and development.

• Financial shocks quickly ripple through the real economy, revealing gaps in the global economic architecture.

• Developing economies are the engine of global growth, but they face the highest financial and climate risks.

• Coordinated reforms linking trade, finance, debt and climate action can restore stability and refocus development.

Global growth will slow to 2.6% in 2025,from 2.9% in 2024, as global trade and investment face increased pressures from financial volatility and geopolitical uncertainty, according to the new UN Trade and Development (UNCTAD) report titled “Trade and Development Report 2025: On the Brink – Trade, Finance and the Reshaping of the Global Economy”. The report shows that fluctuations in financial markets influence global trade almost as much as real economic activity, impacting development prospects globally.

UNCTAD Secretary-General Rebeca Grynspan said the findings show how financial conditions are increasingly determining the direction of global trade. “Trade is not just a chain of suppliers. It is also a chain of credit lines, payment systems, currency markets and capital flows.”

World trade increased by around 4% at the start of 2025, partly due to the acceleration of imports by companies before tariff changes, but also due to structural changes: the expansion of trade in services is more rapid, supported by the growth of the digital economy and artificial intelligence, and also by South-South trade whose growth is also above average.Beyond these factors,underlying trade growth is estimated at between 2.5 and 3 percent and is expected to slow further as financial conditions further influence production and investment decisions.

More than 90% of global trade depends on bank financing.Dollar liquidity and cross-border payment systems are also essential for international trade.

Key takeaways

• Financial Volatility Impacts Trade: Financial market fluctuations now substantially influence global trade,rivaling the impact of real economic activity.
• Slowing Global Growth: Global growth is projected to slow to 2.6% in 2025, driven by financial pressures and geopolitical uncertainty.
• Developing Economies at Risk: Developing economies, while driving global growth, are disproportionately vulnerable to financial and climate risks.
• Need for Reform: Reforms linking trade, finance, debt, and climate action are crucial for restoring stability and promoting enduring development.
• Structural Shifts in Trade: Trade in services,driven by the digital economy and AI,and South-South trade are growing at a faster pace.

FAQ

Q: What is UNCTAD?

A: The United Nations Conference on Trade and Development (UNCTAD) is a principal organ of the United Nations dealing with trade, investment, and development issues.

Q: What does the report mean for developing countries?

A: The report highlights that developing countries face the highest financial and climate risks, making them particularly vulnerable to the current global economic slowdown.

Q: What kind of reforms are needed?

A: The report calls for coordinated reforms linking trade, finance, debt, and climate action to restore stability and refocus development efforts.