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Commodity dependence is a high proportion of
commodities In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a comm ...
in a country's exports. Therefore, a commodity-dependent country is a country in which commodities constitute the predominant share of its exports, that is when more than 60% of the merchandise a country exports, in value terms, are commodities. The high number of exports combined with high proportion of commodities in the said exports has significant consequences on development of a country. Export reliance on main commodities, or "commodity dependence," has long been associated with
underdevelopment Underdevelopment, in the context of international development, reflects a broad condition or phenomena defined and critiqued by theorists in fields such as economics, development studies, and postcolonial studies. Used primarily to distinguish sta ...
, both conceptually and empirically. One of the main consequences of commodity dependence that commodity-dependent countries struggle with is when commodity prices get affected by negative
price shock In economics, a shock is an unexpected or unpredictable event that affects an economy, either positively or negatively. Technically, it is an unpredictable change in exogenous factors—that is, factors unexplained by an economic model—which may ...
s, as this can negatively impact short- and medium-term
economic development In the economics study of the public sector, economic and social development is the process by which the economic well-being and quality of life of a nation, region, local community, or an individual are improved according to targeted goals and o ...
and welfare by increasing those countries' vulnerability to these price shocks. More than half of the world's countries were dependent on commodities, according to a study made by the
UNCTAD The United Nations Conference on Trade and Development (UNCTAD) is an intergovernmental organization within the United Nations Secretariat that promotes the interests of developing countries in world trade. It was established in 1964 by the ...
that looked at the level of commodity dependence around the world from 1998 to 2017, using trade data from 189 countries. Commodity dependence was found to be nearly entirely a
developing country A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreem ...
problem and to mostly affect those classified as least developed countries (LDCs) and
landlocked developing countries The landlocked developing countries (LLDC) are developing countries that are landlocked. The economic and other disadvantages experienced by such countries makes the majority of landlocked countries the least developed countries (LDCs), with inhab ...
(LLDCs) with
Sub-Saharan Africa Sub-Saharan Africa is, geographically, the area and regions of the continent of Africa that lies south of the Sahara. These include West Africa, East Africa, Central Africa, and Southern Africa. Geopolitically, in addition to the List of sov ...
and
South America South America is a continent entirely in the Western Hemisphere and mostly in the Southern Hemisphere, with a relatively small portion in the Northern Hemisphere at the northern tip of the continent. It can also be described as the southe ...
being among the most affected regions. It also revealed that there is a strong positive relationship between export diversification and a country's level of development (
GDP per capita Lists of countries by GDP per capita list the countries in the world by their gross domestic product (GDP) per capita. The lists may be based on nominal or purchasing power parity GDP. Gross national income (GNI) per capita accounts for inflows ...
). However, only 13% of
developed countries A developed country (or industrialized country, high-income country, more economically developed country (MEDC), advanced country) is a sovereign state that has a high quality of life, developed economy and advanced technological infrastruct ...
-- including
Australia Australia, officially the Commonwealth of Australia, is a Sovereign state, sovereign country comprising the mainland of the Australia (continent), Australian continent, the island of Tasmania, and numerous List of islands of Australia, sma ...
,
New Zealand New Zealand ( mi, Aotearoa ) is an island country in the southwestern Pacific Ocean. It consists of two main landmasses—the North Island () and the South Island ()—and over 700 smaller islands. It is the sixth-largest island count ...
and
Norway Norway, officially the Kingdom of Norway, is a Nordic country in Northern Europe, the mainland territory of which comprises the western and northernmost portion of the Scandinavian Peninsula. The remote Arctic island of Jan Mayen and t ...
are in this situation. Dependence can be higher for some nations. 35 countries in the world have commodities making more than 90% of their exports, with
Angola , national_anthem = " Angola Avante"() , image_map = , map_caption = , capital = Luanda , religion = , religion_year = 2020 , religion_ref = , coordina ...
,
Iraq Iraq,; ku, عێراق, translit=Êraq officially the Republic of Iraq, '; ku, کۆماری عێراق, translit=Komarî Êraq is a country in Western Asia. It is bordered by Turkey to Iraq–Turkey border, the north, Iran to Iran–Iraq ...
,
Chad Chad (; ar, تشاد , ; french: Tchad, ), officially the Republic of Chad, '; ) is a landlocked country at the crossroads of North and Central Africa. It is bordered by Libya to the north, Sudan to the east, the Central African Republic ...
,
Guinea-Bissau Guinea-Bissau ( ; pt, Guiné-Bissau; ff, italic=no, 𞤘𞤭𞤲𞤫 𞤄𞤭𞤧𞤢𞥄𞤱𞤮, Gine-Bisaawo, script=Adlm; Mandinka: ''Gine-Bisawo''), officially the Republic of Guinea-Bissau ( pt, República da Guiné-Bissau, links=no ) ...
, and
Nigeria Nigeria ( ), , ig, Naìjíríyà, yo, Nàìjíríà, pcm, Naijá , ff, Naajeeriya, kcg, Naijeriya officially the Federal Republic of Nigeria, is a country in West Africa. It is situated between the Sahel to the north and the Gulf o ...
surpassing 98%. The export revenue from a single product can be as high as 75% in some instances. According to UNCTAD's State of Commodity Dependence 2021 report, published on September 8th, the number of countries that are heavily dependent on commodities has climbed over the past ten years, from 93 in 2008-2009 to 101 in 2018-2019.


See also

*
Economic diversity Economic diversity or economic diversification refers to variations in the economic status or the use of a broad range of economic activities in a region or country. Diversification is used as a strategy to encourage positive economic growth and ...
* Oil dependent country


References

Commodities {{economy-stub