As part of the work, the authors analyzed the relationship between commodity trade conditions and the risk of economic growth slowdown, relying on the concept of the "Middle Income Trap".
The Middle Income Trap is an economic situation where economic growth stalls at a middle level, and the country is unable to transition to the category of high-income countries for a long time. This occurs when initial successes in industrialization are exhausted, and new sources of growth do not emerge in sufficient volume.
Experts concluded that commodity trade conditions can significantly influence the process of countries transitioning between different income groups. While favorable trade conditions reduce the likelihood of economic growth slowdown, they may also hinder the transition to a higher income category.
The report emphasizes: "Good trade conditions can contribute to short-term growth; however, they may complicate the diversification process, which hinders long-term income convergence."
The study showed that with a high initial level of trade, favorable conditions increase the chances of transitioning to the group of high-income countries. However, further increases in the share of trade driven by good trade conditions may reduce these chances.
Analysts also point out that dependence on commodity exports may contribute to medium-term economic growth but simultaneously hinder structural changes in the economy.
According to EDB data, out of 92 countries classified by the World Bank in 2000 as having a middle-income economy, only 27 managed to transition to the category of high-income countries.
Among other factors contributing to growth slowdown in the context of the "Middle Income Trap" hypothesis are inefficient investments, misallocation of capital, and insufficient efficiency of economic structures.
