IMF predicts slow growth in export of energy, metal by 2017

With a weak outlook for commodity prices, particularly for energy and metals, growth in commodity-exporting emerging and developing economies could slow further over the next few years, says a new study by the International Monetary Fund (IMF).

The study, published in the forthcoming 2015 World Economic Outlook, suggested that the recent declines in commodity prices could shave off one percentage point yearly from the growth rate of commodity exporters over 2015 to17 as compared with 2012 to14.

In exporters of energy commodities, the drag is estimated to be even larger—about 2¼ percentage points on average.

Deputy Division Chief in the Research Department, Oya Celasun, said that this slowdown is not just a cyclical phenomenon. “It has a structural component as well. Investment, and accordingly, potential output, tend to grow more slowly in exporters during commodity price downswings.”

The decline in potential growth exacerbates the post boom slowdown, Celasun says. “This means that policymakers in commodity-exporting countries must go beyond demand-side measures and tackle structural reforms to improve human capital, increase investment and, ultimately, unleash higher productivity growth.”

The study stated that commodity prices are unpredictable and can be very volatile. “They can remain high or low for prolonged periods, giving the impression that their levels are permanent, only to exhibit very sudden and large changes.

“Recent history is no exception. The first decade of the 2000s saw a persistent surge in commodity prices from record lows in the mid-1990s to record highs by 2011. More recently, however, the prices of commodities have fallen again, some in a dramatic fashion, and are expected to remain weak for some time.

“In commodity-exporting economies, output growth, and economic developments more broadly, are unavoidably driven by commodity price cycles. To understand the channels better, the study examines data for more than 40 commodity exporters in emerging and developing economies for the last 50 years. It finds that output and, particularly, investment grow faster during commodity price upswings than in subsequent downswings”.

It noted that much of this cycle reflects a strong investment response in the commodity-producing sector itself, which spills over into supporting industries such as construction, trans