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Commodity exporters enjoy high demand
UNCTAD: Happy times for commodity exporters
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10/2005
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[ UNCTAD annual report ]
Commodity exporters enjoy high demand
The UN Conference on Trade and Development (UNCTAD) expects the world economy to grow slightly slower in 2005 than in 2004. In its Trade and Development Report 2005, UNCTAD predicts a growth rate of three percent for this year, compared with four percent for last year. The drop is mainly attributed to the sense of economic slack in the USA and Europe as well as the high oil price.
UNCTAD sees the oil price hike as cause for concern. Nonetheless, shocks did not materialise to the anticipated extent. This has two reasons. On the one hand, rich countries today are considerably less dependent on oil than they were in the 1970s. They are run more energy-efficiently and their share of services in GDP has grown. On the other hand, the price hike does not result from a sudden shortage, but to continually rising demand. It is the emerging economies that import oil – such as Brazil, China, India or Thailand – that are primarily affected.
At the same time, UNCTAD points out that many developing countries benefit from the commodity prices that have been increasing since 2002. To a large extent, this has been caused by the expanding demand of China and India, the two new growth centres of the world economy. According to UNCTAD, their impact on the rest of the world will be far greater than that of other Asian nations during their time of rapid progress and should benefit many other developing countries – particularly commodity exporters. For others though – for example textile exporters – China’s success is painful.
The report states that increased commodity prices have shifted the terms of trade. The purchasing power from oil exports has risen by 30 percent since 2002, while that from mining exports has grown by 15 percent. However, this shift is not necessarily reflected in losses for exporters of manufactured goods. On the contrary: Higher revenue for commodity exporters often leads to more demand for manufactured goods driving up imports.
Nevertheless, UNCTAD urges countries that export commodities not to rest on their recent success, as commodity prices will tend to sink again in the future. In fact, despite the hike in recent years, prices are still a third below the average of the period from 1960 to 1985. Commodity exporters should use their additional income to invest in infrastructure, productivity and diversified industries. (ell)
On the web:
http://www.unctad.org
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