An error occured. Details Hide
You have unsaved pages. Restore Cancel

The concentration index of exports estimates a country’s reliance on a limited group of commodities as its primary source of foreign exchange income. Ranging from 0 (perfect diversification) to 1 (concentrated on a single product)*, a comparison of index scores to the contribution of natural resources to GDP worldwide shows that countries that are resource-rich tend to have less diversified export bases.

  • Last year Iraq’s export concentration index reached 0.97, driven by its export concentration in mineral fuels, namely oil. Other oil exporters—including Angola, Iran, Kuwait, and Nigeria, among others—likewise have high concentration scores. While mineral fuels exports make up a relatively lower percentage of Russia’s export income—approximately 63% in 2015—the collapse of global oil prices has still had a pernicious effect on Russia's economy, according to the World Bank.
  • Precious or semi-precious stones and metals are another common commodity exported by countries with high concentration scores. Botswana is one of the world’s leading sources of mined diamonds, which made up 84 percent of the country’s exports in 2015.
  • South Korea has a relatively high export concentration score compared to other developed countries, but unlike developing country examples, South Korea is not a raw-material producer. Slightly more than half of Korea’s exports are concentrated in machinery manufacturing, with primary exports including ships, cars, computers, and other electronic items.

Export concentration is a concern for economic planners worldwide but less so in most developed economies which tend to maintain more diversified export profiles. In fact, the world's leading exporters of particular products are not concentrated on the export of those same products, decreasing their vulnerability to changes in global demand and the corresponding ebb and flow of export earnings that bring in foreign exchange.

  • For example, while Norway is the largest exporter of fish in the world, fish makes up less than 10 percent of its exports. The same is true for South Korea: ships and boat exports constitute only 7 percent of the country's total experts even though it is the world's top exporter of these products.
  • Developed economies diverse export bases thus theoretically made them more capable of coping as world exports decreased by 19 percent in 2015 (total value of $3.5 billion) and global exports of oil were slashed in half.
  • Based solely on export concentration scores, Italy would be considered lowest risk in terms of economic distress from changes in global demand, as it has long held the lowest score on the index. The countries of the European Union, in general, maintain low export concentration scores.

*The index is calculated as a sum of squared shares of products constituting a country's exports.

Related Insights from Knoema

Danger Lurking in Global Macroeconomic Imbalances

  By 2021, the global macroeconomic imbalance may return to the historic 2007-2008 levels that preceded the global financial crisis (aka the Great Depression). A high macroeconomic imbalance may be dangerous as the last time it reached these levels resulted in significant global economic downturn.The global macroeconomic imbalance can be measured as the standard deviation of the annual current account balances (CAB) of the largest economies. As goods and services make up the predominant share of the CAB, for simplicity you can consider the CAB balanced if exports equal imports.A...

US-China Trade War: First Signs of Thaw

Weeks after US President Donald Trump and Chinese President Xi Jinping agreed to a temporary halt in the US-China trade war, the first positive signs of a return to normal trade relations are emerging. Last week, the China Grain Reserves Corporation (Sinograin) and fellow state-run Chinese enterprise Cofco bought more than 1.5 million tons of US soybeans, the first significant deal since the countries agreed to a 90-day truce from December 1, 2018, to March 1, 2019. The announcement caused a spike in soybean futures to $918.5 a bushel, the highest price since June.Soybeans were one...

An International Trade Perspective on the War in Syria

  The Syrian Civil War is the largest ongoing military conflict in the world, already claiming a total of at least 167,000 lives* since civil unrest first erupted in March 2011 on the heels of the Arab Spring. Human life is one measure of a wars devastation. Today, we examine the devastation of war from an economic perspective: international trade.  The disruption in Syrian trade has already lowered its ranking globally from the 88th largest exporter in 2011 to the 141st in 2015.Syria experienced the world's second largest loss of total foreign trade from 2011 to 2015, with exports...

United States: The World's Newest Major Exporter of Crude Oil

In June, US crude oil exports reached historic levels at nearly 2.2 million barrels per day (b/d), a level similar to that of Nigeria and Iran. From 1975 until late 2015, a federal ban on the export of US crude oil severely restricted crude oil exports to all countries except Canada. By lifting the ban, the US Government has transformed the United States into a major exporter of crude oil and a force that is reshaping global oil markets. To date in 2018, the United States has averaged more than 1.7 million b/d of crude oil exports while continuing to import an average of 7.9 million...