Dependence on commodities persists heavily, and it's crucial for developing nations to boost the value of their goods to reverse the trend
In a recent analysis, it has been revealed that commodity dependence remains deeply entrenched among least developed countries (LDCs), landlocked developing countries (LLDCs), and small island developing states (SIDS), with over 80% of LDCs and LLDCs and around 60% of SIDS heavily reliant on commodity exports for more than 60% of their merchandise export earnings during 2021-2023.
This dependence largely involves three groups of commodities: energy, mining, and agriculture. Among 143 developing countries analyzed, 95 remain commodity dependent. For African nations (many of which fall into the LDC and LLDC categories), 46 out of 54 countries depend on raw materials exports such as hydrocarbons, agricultural products, and minerals.
Regional patterns show that Central, West, and East Africa exhibit particularly intense commodity dependence, with countries in Central Africa averaging 80% of exports from commodities and West Africa 75%. East Africa had 83% of countries reliant on commodity exports. LLDCs and SIDS also face similar vulnerabilities, although at slightly lower prevalence compared to LDCs.
While the share of commodity exports in world trade has slightly decreased over the past decade, the value of commodity trade has grown relatively slowly. The value of world trade in goods increased by 25.6% during the same period, while the value of commodity trade expanded relatively slowly at 15.5%. Energy remains the dominant category, with agriculture and mining still significant contributors.
The strong dependence exposes these countries to price volatility, external shocks, and weak economic resilience. Reports stress the need for these economies to diversify, add value to raw materials through industrial development, and strengthen macroeconomic and fiscal policies to absorb shocks effectively.
Without deeper structural transformation to produce higher-value products and reduce raw material export reliance, these countries risk remaining vulnerable and missing sustainable development opportunities. The decrease in energy products from Nigeria, Angola, and Algeria was a significant factor in Africa's decrease in commodity exports during 2021-2023, resulting in a fall in total earnings from commodity exports by over US$25 billion from a decade before.
The growth in Africa's agricultural and mining sectors was offset by the decrease in commodity exports during 2021-2023, leading to a stagnation in overall earnings from commodity exports. Similar patterns also showed up in Central Asia and South America, with Western Asian countries, including the United Arab Emirates and Saudi Arabia, contributing significantly to the sub-regional total.
In conclusion, while commodity dependence among LDCs, LLDCs, and SIDS remains very high, the latest data signal a slow downward trend in overall global commodity export share but persistent vulnerabilities. Sustainable growth for these countries requires enhanced value addition, diversification, and stronger economic policies to manage external risks.
The finance sector must address the persisting vulnerabilities of least developed countries (LDCs), landlocked developing countries (LLDCs), and small island developing states (SIDS) due to their high reliance on commodity exports. To achieve sustainable growth, these economies need to diversify beyond the traditional energy, mining, and agriculture industries, strengthening their economic resilience and industrial development.
The industry sector plays a crucial role in this diversification, as it presents an opportunity for these countries to produce higher-value products and reduce their reliance on commodity exports, especially raw materials such as hydrocarbons, agricultural products, and minerals. This transformation is essential to ensure that these countries can effectively manage external shocks and volatility, seize sustainable development opportunities, and lessen their exposure to price fluctuations.
