COVID-19 and commodities: Assessing the impact on exports from Commonwealth countries
The study analyses the salience of commodities in Commonwealth members’ merchandise trade and estimates the impact of the COVID-19 pandemic-induced trade disruptions on the commodities exports to five main markets: China, the United States of America European Union (EU-27), the United Kingdom and Australia.
The analysis finds that commodities constitute almost half of Commonwealth countries’ global merchandise exports but the share for 35 commodity dependent Commonwealth countries is above 80%. The COVID-19 shock has been perceived as a global negative shock hurting all sectors and all markets. Indeed, the estimates presented in this study indicate that compared to business as usual, the commodity exports to these five destination markets are expected to fall by between $98 billion and $123 billion in 2020.
This represents an export loss of 19% to 24% with respect to benchmark estimates. On aggregate, all destinations are characterized by COVID-19 projections below their respective counterfactual. Exports to the United Kingdom, the lowest hit destination market, are expected to stand at between $352 million and $399 million below a business as usual situation. Exports to the United States market are the hardest hit ($41 billion to $50 billion) followed by those to the EU-27 ($33 billion to $41 billion) and China ($18 billion to $26 billion).
The picture arising from a more granular analysis on the exporters side shows relatively strong nuances. The results clearly indicate, though, that for the countries dependent on fuel exports, the recent collapse in oil prices and its detrimental effect on their export earnings has been amplified by the pandemic.
Overall, projections and simulation results would suggest that dependency patterns have at best been maintained because of the pandemic shock. At worst, and especially among highly dependent commodity exporters, the pandemic has further accentuated a fragile macroeconomic situation already under pressure due to heightened price fluctuations in several commodity markets.