The number of countries depending on commodities has reached its highest level in 20 years, according to a new report by the United Nations Conference on Trade and Development (UNCTAD).
UNCTAD defines a country as dependent on commodities when these account for more than 60 percent of its total merchandise exports in value terms.
The State of Commodity Dependence Report 2019 published shows commodity-dependent countries increased from 92 between 1998 and 2002 to 102 between 2013 and 2017.
More than half of the world’s countries (102 out of 189) and two thirds of developing countries are dependent on commodities, the report indicates.
“Given that commodity dependence often negatively impacts a country’s economic development, it is important and urgent to reduce it to make faster progress towards meeting the sustainable development goals,” said UNCTAD Secretary-General Mukhisa Kituyi.
Commodity dependence affects developing countries almost exclusively, according to the report.
It affects 85 percent of least developed countries, 81 percent of landlocked developing countries and 57 percent of small island developing states.
With 89 percent of countries in Sub-Saharan Africa being commodity-dependent, it is the hardest-hit region.
It is followed by the Middle East and North Africa, where 65 percent of countries depend on commodities.
Half of the countries in Latin America and the Caribbean, and half of the countries in East Asia and the Pacific are also commodity dependent.
Commodity dependency is also persistent, according to the report.
The dominant groups of exported products changed in only 25 percent of countries between 2013 and 2017, partly due to changes in commodity prices.
The number of countries dependent on the export of agricultural products declined from 50 to 37 between the 1998-2002 and 2013-2017 periods.
The number of mineral-dependent countries steadily rose, from 14 to 33, while the number of energy-dependent countries increased from 28 to 32.
Relative price fluctuations among the different commodity groups contributed to changes in the dominant product groups exported, as the prices of energy and minerals increased much more than those of agricultural and manufactured goods.
Vulnerability to price shocks and volatility
Commodity-dependent developing countries are vulnerable to negative commodity price shocks and price volatility.
The average commodity price levels between 2013 and 2017 were substantially below their peak of between 2008 and 2012, the report reveals.
This contributed to an economic slowdown in 64 commodity-dependent countries, with several of them going into recession.
As growth decelerated, the fiscal situation in many of these countries deteriorated, resulting in the accumulation of public debt, often as an increase in external debt.
The external debt of 17 commodity-dependent developing countries increased by more than 25 per cent of GDP between 2008 and 2017, according to the report.
Efforts at diversification
The report notes that some countries have succeeded in diversifying their production and exports over the past two decades.
For instance, some energy-export dependent countries such as Oman, Saudi Arabia and Trinidad and Tobago increased the share of their non-commodity exports by adding value in their downstream sectors. Other energy or mineral-export-dependent countries like Rwanda and Cameroon managed to expand their agricultural exports.
The 2019 report, the fourth edition in the series launched in 2012, contains 189 statistical country profiles of developed countries and economies in transition.