Anyone that has taken a even furtive glance at
the titles of my posts must have noticed that the catalysts behind export
growth particularly interest me. This is particularly interesting for the
countries undertaking internal devaluation since exports are in most cases the
major driver behind GDP growth.
Eurostat publishes stats for export market
shares. What’s more it publishes the 5-year rolling growth rate of export
market shares. I think that this data-point is of particular significance since
it captures the trend in each country’s competitiveness.
I wanted to run a regression between the 5-year
rolling growth rates in export shares and
the average growth rate of real exports for years 2010-2011 (after the 2009 great
trade collapse). Here’s the scatter plot.
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| source: Eurostat, own calculations |
As the scatter plot makes rather obvious the
2009, 5-year growth rate of export shares can produce a quite good forecast of the
next 2 years average growth rate of real exports. Of course, this is a rather
facile and over-simplifying claim and what’s more this is an ex-post claim
when everything tends to appear to be clearer.
Nonetheless, this is a point that no-one has
actually brought-up in the current debate regarding export-led growth. Namely,
a country with declining competitiveness, that is losing export market share
fast will find it harder to turn the tables than a country which is gaining
market share.
Furthermore, a rather worrying fact is that all
western European countries are witnessing their export market shares decline
fast. Even, the, admittedly, more dynamic (but not without their own sets of
problems and not decoupled from their western neighbours) Central Eastern European (CEE) countries, are witnessing their export
market shares rise at a declining pace.
Since it would take many pages to post the
charts about all European countries, here are the charts about those that are
(or were) in the midst of internal devaluation processes.
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| source: Eurostat |
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| source: Eurostat |
A quite important indicator of whether internal
devaluation will be successful or not, is the size of a country’s external
sector, along with its dependence on domestic demand. But this is not enough. Ireland,
is a perfect example to back the above claim. Its external sector and small
dependence on domestic demand, made internal devaluation less painful, always
compared with other countries (for example my native Greece). Nonetheless, the
growth of real exports was lackluster. Maybe the country’s declining market
share can be blamed.
To wrap this up, the above puts to show how
much a multi-factorial affair the success of internal devaluation is. And the overall
momentum of a country’s external sector as well as of the whole of its economy
seems to be rather crucial…
