The Bric countries, which registered a buoyant growth of merchandise trade in recent years, have witnessed a sharp decline in fortunes as exports and imports slowed down with demand slipping in both developed and developing countries. China, the largest trading nation among developing countries, with exports hovering around a trillion dollars and a market share of 8.7%, which was next only to that of Germany, has seen exports take the highest hit in a decade with flows declining for the second consecutive month in December. And the fears are that 2009 may see exports even decline for the first time. The only consolation is that the fall in exports in the most recent months has been contained at less than 3%, which is comparatively a better record than other Bric nations, at least till now.
Russia, the second largest exporter among Bric countries, with a 2.5% share of merchandise exports, seems to have taken the biggest hit so far with exports declining by a steep 16.7% in November, no doubt fuelled by the falling prices of oil, its mainstay in the global markets.
The trends in the other two Bric countries, India and Brazil, which account for 1.1% and 1.2% respectively of global trade have been similar, but with India taking the brunt of the burden. While the decline in Indian exports averaged around 10% in October and November, Brazil has been able to stymie the fall to about 3% in December.
The sharp fall in Indian exports is surprising, given that its 20% growth in merchandise export growth in 2007 was fairly much more buoyant than the 17% export growth in Brazil.
But what is more surprising is the impact of these falling exports on the balance of trade. In the case of China, where imports have been hit far more badly than exports, the slowdown in trade has boosted the trade surplus to new highs. Trends show that the Chinese trade surplus has shot up from $19.4 billion in January 2008 to $40 billion in November 2008, the highest in recent years. Brazil also experienced a similar trend with its trade surplus going up from close to a billion at the start of the year to a peak level of $3.3 billion by mid-2008, after which it shrunk marginally by a billion to $2.3 billion recently.
In sharp contrast, the merchandise trade surplus in Russia, which peaked at a monthly average of around $18 billion at the middle of 2008, when oil prices were moving close to peak levels, has seen its trade surplus shrink to $8.4 billion in November, the lowest in over 18 months. India?s, which has a perennial trade deficit, has seen the numbers first soar up from around $9 billion in January 2008 to a high of $14 billion in August, after which it has has rolled down to $10 billion in November.
Detailed trends on the export slowdown in China during November, the first month of the decline, show that the fall has been extensive. Month-on-month growth figures for November show that the worst-hit export markets were in the Latin and North American regions where the flows declined by 20.5% and 13.5% respectively. Exports to Asia and Europe also fell by 8.7% and 9.7% respectively. What is perhaps more significant is that Chinese exports to India continued to grow by 7.4% in the month, even as exports to most other Asian markets shrunk rapidly.
A product-wise profile show that the worst affected of the Chinese exports in November 2008 were the big ticket items like mechanical & electrical equipment and hi-tech products. Month-on-month figures show that the exports of the former declined by 10.4%, while that of the latter shrunk by 12.5%. More significant is the decline in exports of labour-intensive products like garments and toys. While garment export declined by 6.7% in November, that of toys went down by as much as 21.6%.
The Chinese imports from major markets were hit extensively. Month-on-month figures for November show that imports from Africa fared the worst with inflows declining by 31.3%. Imports from the Asian region also fell by a significant 24.4%. Surprisingly, imports from the EU continued to pick by 9% while that from North America shrunk marginally by a few decimal points. Surprisingly, in the case of imports also a significant decline was registered in the major products like mechanical and electrical equipments and hi-tech products whose inflows declined by 18% and 20.3% in November.
Though detailed trends in exports from other Bric countries like India and Russia are not available most recent reports show that the Indian government has made it clear that it would be difficult to attain the $ 200 billion export target for 2008-09. The scenario seem to be equally worse in Brazil which expect exports to plunge by 20% with the value of goods sold in external markets contracting from $198 billion to $ 158 billion.
Brazil which depends on the US, EU and Japan for around 40% of its exports, expects all these major markets to be affected by the slowdown. The country which banks on commodities for two-third of its exports is also to be affected by the slump in prices. The focus is to try and boost exports to new destinations in Eastern Europe, Central Asia, Africa and the Middle East.
?p.raghavan@expressindia.com