The global trade finance gap soared to an unprecedented $2.5 trillion in 2022, escalating from $1.7 trillion two years prior, reveals the 2023 Trade Finance Gaps, Growth and Jobs Survey presented by the Asian Development Bank (ADB) today.
This gap represents the discrepancy between requests for and approvals of financing intended to bolster imports and exports. Despite the robust recovery from the COVID-19 downturn, with global goods exports surging by 26.6% in 2021 and 11.5% in 2022, the escalating economic perils have made securing finances more challenging than before. Data suggests a stagnation in the last quarter of 2022, and as of April 2023, a decline in global trade exports by roughly 3%.
Drawing from data of 137 banks and 185 firms across about 50 countries, this survey is globally recognized as the premier indicator of trade finance’s health. Respondents pinpointed the rising interest rates and financial market uncertainties in 2022, compounded by the global economic slowdown and geopolitical tensions.
ADB’s Director General for Private Sector Operations, Suzanne Gaboury, remarked, “The burgeoning gap in global trade finance is suffocating the potential of trade to catalyze crucial human and economic progress through jobs and growth, especially as the world grapples to rebound post-pandemic.”
Notably, 60% of the banks surveyed reported that their trade finance portfolios were affected by the Russian incursion into Ukraine, attributing it to growing geopolitical unpredictability and a spike in commodity prices.
In a novel approach, the 2023 survey also delved into environmental, social, and governance (ESG) issues, as well as the role of digitalization, aiming to discern their influence on supply chains and the trade finance gap. A significant majority of participants were of the view that aligning with ESG could be instrumental in narrowing the trade finance chasm.
Firms unanimously cited the primary supply chain hurdle as the lack of adequate financing. They underscored the significance of dependable financing, efficient logistics, and digital technology adoption as pivotal to bolstering supply chain resilience.
Leveraging ADB’s stellar AAA credit rating, the Trade and Supply Chain Finance Program (TSCFP) collaborates with over 200 partner banks to promote trade, thereby enhancing imports and exports, facilitating growth. Since its inception in 2009, the TSCFP has backed $57 billion in trade via 45,510 transactions in markets typically challenging for the private sector.
Committed to fostering a flourishing, inclusive, and sustainable Asia-Pacific region, ADB, established in 1966, continues its endeavor to eradicate extreme poverty. It boasts a diverse membership of 68 countries, 49 of which hail from the region.