The world still has a long way to go in breaking commodity dependence, a situation where a country makes more than 60 per cent of its merchandise export earnings from commodities.
Such goods can be broadly categorised into three categories: energy, mining and agriculture – be it the wheat or coffee that we consume, or metals like copper and lithium that help power our daily lives.
But entrenched reliance on these primary products – long been of global concern – hinders industrial development and threatens countries’ fiscal stability when global prices go volatile.
Alarmingly, commodity dependence is prevalent across structurally weak and vulnerable economies, affecting more than 80 per cent of least developed countries and landlocked developing countries, and roughly 60 per cent of small island developing states.
More broadly across developing countries, two thirds of them – 95 out of 143 – remained commodity dependent during 2021 and 2023, according to the latest edition of The State of Commodity Dependence report released by UN Trade and Development (UNCTAD) on 21 July.
The dependence is particularly heightened in Middle and Western Africa countries, most of which earned over a staggering 80 per cent of their export revenues from primary commodities.
Similar patterns also showed up in Central Asia and South America, where resource wealth plays a central role in trade.
The report warns that without more efforts to diversify economies and add value, countries risk squandering opportunities to translate their raw material wealth into engines of sustainable and resilient growth.
Commodity trade still matters, but to a slightly lesser extent
Commodity exports remain central to the global economy, accounting for 32.7 per cent of international trade in value terms between 2021 and 2023 – slightly down from 35.5 per cent from a decade earlier.
Comparing the same periods, the value of world trade in goods went up 25.6 per cent, while that of commodity trade expanded relatively slowly at just 15.5 per cent.
The shift underscores that countries mainly exporting raw materials could miss out on the broader benefits of global trade – increasingly driven by diversification, innovation and value-added production.