Commodity prices will remain at historically high levels until the end of 2024, the World Bank said in the latest edition of the Commodity Markets Outlook report published on Tuesday.
The war in Ukraine has caused a major shock to commodity markets and changed the pattern of trade, production and consumption around the world, the Washington-based financial institution said in a statement.
“Globally, this is the biggest commodity shock we have seen since the 1970s. As was the case then, this shock is compounded by an upsurge in food trade restrictions. , fuel and fertilizers »explained the World Bank’s Vice President for Equitable Growth, Finance and Institutions, Indermit Gill.
“These phenomena have begun to raise the specter of stagflation. Policymakers should seize every opportunity to stimulate economic growth at the national level and avoid any action that is harmful to the global economy”he pointed out.
According to the report, energy prices are likely to rise by more than 50% in 2022 before falling in 2023 and 2024. As for those of non-energy goods, including agricultural products and metals, they are expected to increase by almost 20% in 2022, then also decrease in the following years. However, commodity prices are expected to remain well above the average of the past five years, and in the event of a prolonged war or new sanctions against Russia, they could become even higher and more volatile than currently expected.
Due to trade and production disruptions following the war, the price of crude oil (Brent) is expected to average $100 per barrel in 2022, its highest level since 2013 and an increase of more than 40% from 2021. It is expected to fall to $92 in 2023, which will be well above the five-year average of $60 a barrel. (European) natural gas prices are expected to be twice as high in 2022 as in 2021, while coal prices are expected to be 80% higher, both historic highs.
“Commodity markets are suffering one of the biggest supply shocks in decades due to the war in Ukraine”said Ayhan Kose, director of the World Bank’s Perspectives Division, which produces the report.
“The resulting rise in food and energy prices has a huge human and economic cost and risks undermining progress in poverty reduction. In addition, this increase in commodity prices is exacerbating already high inflationary pressures around the world.”he said.
Wheat prices are forecast to increase by more than 40% and reach a record high in nominal terms this year, which will hurt developing economies that depend on wheat imports, especially from Russia and Ukraine. Metal prices should rise by 16% in 2022 before moderating in 2023, but remaining at high levels.
“Commodity markets are under enormous pressure, with some prices reaching unprecedented levels in nominal terms”noted John Baffes, senior economist in the World Bank’s Perspectives Division.
This will have lasting repercussions, he stressed, noting that the sharp rise in the prices of inputs such as energy and fertilizers could cause a decline in food production, especially in developing economies.
“Reduced use of inputs will weigh on food production and quality, affecting food availability, rural incomes and the livelihoods of the poor”added John Baffes.
The report urges policy makers to act quickly to minimize the damage to both their fellow citizens and the global economy. It advocates using targeted social safety nets, such as cash transfers, school meals programs and public works camps, rather than food and fuel subsidies.
A key priority should be to invest in energy efficiency, including the modernization of buildings. Finally, the report also calls on countries to accelerate the development of carbon-neutral energy sources, such as renewable energies.