Export-led strategies becoming unviable: UNCTAD

Countries should engage in more balanced development strategies with greater role for domestic, regional demand to boost exports

Prolonged period of slow growth in developed countries is making export-led growth strategies increasingly unviable.

In order for countries to boost their exports, it is important they resort to more balanced development strategies with a greater role for domestic and regional demand, according to a UNCTAD Trade and Development Report 2013.

Developing country exports and developed country imports remain far from their pre-crisis dynamisms while strong growth performance over past decade made share of developing countries in global GDP jump sharply, the report said.

Launching the report Jayati Ghosh, professor, Jawaharlal Nehru University (JNU) said the global economy is likely to face yet another financial downturn due to severe differences that exist in developed as well as developing countries.

“We have same imbalances in many nations that we had in 2008... There are signs that there are imbalances which have to be resolved in a right way, otherwise another economic crisis is coming for sure. We can manage it for a while but it is going to come," she said.

According to the report, import of consumer goods in US, especially in non-food categories, became sluggish in 2008. Between the first quarter of 1999 and the third quarter of 2008, these imports grew on average by almost 2% per quarter, before declining sharply.

However, during 2009 it experienced a rebound before stagnating at their pre-crisis level over the past two years. As are result, export opportunities of developing countries suffered a massive setback.

According to Ghosh, the US is able to reduce its trade deficit by exporting more and importing less, which might have future repercussions for other economies.

Merchandise export from India during the 2012-2013 fell by 1.76% to $300.60 billion while imports to $491.60 billion giving rise to a historic trade deficit of $191 billion. The current account deficit, thus, swelled to 4.7% of the GDP.

Unsustainable current-account deficit emerges when the income elasticity of demand for primary commodity exports in world markets is lower than the income elasticity of demand for imported goods needed by developing countries, UNCTAD said.

Ghosh also added that increasingly countries are adopting protectionist measures that are against global trading norms, which is a sign that the world trade will fall further.

Many developing economies continue to have substantial pockets of poverty and lagging regions, especially in sub-Saharan Africa and South Asia. Such pockets hamper the expansion of domestic consumption of durable consumer goods, it said.

The World Trade Organization (WTO) has revised growth rates of global trade to 2.5% for this year from 3.3% earlier and for 2014 it has revised the projection down to 4.5% from 5% previously.