How the pandemy “hit” our foreign trade

There is no economic situation in the economy where all the productive forces can earn at the same time. Also, there are no pessimistic scenarios in the economy where everyone is on the brink of failure. Crisis "hits" a group of countries and opens a window of opportunity for other groups. But now everyone in the world is losing as a result of the blows of the pandemic. States are unable to meet their obligations, companies are sinking, citizens are losing jobs, and so on. Now the situation is such that everyone loses in the current status quo. Both those who buy a product and who sell it. Because the supply chain has been broken.

The pandemic has slowed economic activity on a global scale. The flow of capital in the world has stopped. Produced goods and services do not exceed borders. In such a situation, global trends occurring independently of the states result in a reduction in the volume of foreign economic relations of the countries. However, the revenues and market shares of companies working on the "work from home" model are growing.

Current trends in the foreign trade of natural resource countries -

The example of Azerbaijan

According to the Central Bank, the foreign trade turnover in the first quarter of 2020 amounted to $ 7.1 billion, a surplus of $ 3.6 billion in the oil and gas sector closed a deficit of $ 1.7 billion in the non-oil sector, and as a result, there was a surplus of $ 1.9 billion (a decrease of 24.7%) in the foreign trade balance. During the reporting period, Azerbaijan had trade relations with 155 countries. 13% of foreign trade falls to the share of the CIS member states and 87% to other foreign countries. [1]

During the reporting period, exports of goods decreased by 6%. That is, exports of goods amounted to $ 4.5 billion. During the period, exports in the oil and gas sector decreased by 6.9% to $ 4.1 billion. Only $ 3.2 billion of exported oil products fell to the share of crude oil.

Imports of goods increased by 15% to $ 2.6 billion. The total value of consumer goods in the structure of imports was $ 1.1 billion, of which $ 352 million fell to the share of food products. Imports in the non-oil sector increased by 12.4% to $ 2.1 billion. If you pay attention, there are double-digit lags in the structure of both imports and exports.

Half of the year is over. It is also possible to estimate the semi-annual time interval. Over the past five months, according to the official government agencies, in the "Export Summary" bulletin, Azerbaijan's exports amounted to $ 6.9 billion, and in the non-oil sector - $ 721 million. Exports in the non-oil sector decreased by 8.9 percent compared to the same period last year. [2]

It is very interesting that dominance in non-oil exports is based on 3 products: tomatoes, gold, and hazelnuts. According to the Center for Economic Reforms Analysis and Communication, in the list of non-oil exports in January-May 2020, tomatoes ($ 123.1 million) ranked first, gold (not used in coinage and other unprocessed forms - $ 64.7 million) ranked second, and peeled hazelnuts ($ 51 million) ranked third. [3] The methodological speculation here is that gold is considered a non-oil product although it is a component of a natural resource, and its material equivalent "is reflected" in the non-oil sector. Its amount is not small - $ 65 million. We have gold exports about half of the tomatoes, which are leaders in non-oil exports. Non-oil "bubbles" cannot stay afloat for long when products of the chemical industry, such as gold, are considered to be elements of a resource economy. Therefore, we must choose and promote the export of non-oil products and mobilize that potential. Then, as the range of non-oil exports expands, export dollarization may end its fragile phase. If we could have created more export-oriented companies at the time by granting economic freedoms, now we would have more exports of non-oil products. Although it has been over the centuries, how right Adam Smith, the "father of liberalism", was when he put forward this thesis: "Let them do, let them go."

Sources:

[1] Balance of Payments Report of the Central Bank of the Republic of Azerbaijan for the first quarter of 2020

[2]http://www.iqtisadiislahat.org/news/ixrac_icmali_nin_iyun_sayi_teqdim_edilib-970

[3] "Export Summary" of the Center for Economic Reforms Analysis and Communication, June 2020 Issue