ISLAMABAD: The World Bank projects that global commodity prices will fall 3 per cent in 2024, but the conflict in the Middle East could halt the inflationary decline.
“The World Bank commodity price index is expected to fall 4pc in 2024, following a projected decline of nearly 24pc in 2023, the sharpest drop since the pandemic”, noted the latest Commodity Markets Outlook (CMO) released on Thursday.
Energy prices are expected to decline by almost 5pc in 2024 and remain relatively stable in 2025. Agriculture prices are expected to decline over the forecast period, while metal prices are set to fall in 2024 but see a 6pc uptick in 2025, the CMO forecast assuming that the conflict in the Middle East will have a limited impact on commodity prices, though geopolitical risks remain high.
On the other hand, disappointing global growth presented a downside risk, especially for industrial commodities, the CMO said. Additional trade restrictions and intensification of El Niño could push food prices higher, it warned.
Warns ME tensions could hit global progress on inflation
The report said global commodity prices were now leveling off after a steep descent that played a decisive role in reducing overall inflation last year. This could make it harder for central banks to cut interest rates quickly.
The World Bank’s forecasts call for a decline of 3pc in global commodity prices in 2024 and 4pc in 2025. That pace will do little to subdue inflation that remains above central bank targets in most countries. It will keep commodity prices about 38pc higher than they were on average in the five years before the Covid-19 pandemic.
“Global inflation remains undefeated,” said Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President. “A key force for disinflation — falling commodity prices — has essentially hit a wall. That means interest rates could remain higher than currently expected this year and next. The world is at a vulnerable moment: a major energy shock could undermine much of the progress in reducing inflation over the past two years.”
Persistently high geopolitical tensions over the past two years have propped up the price of oil and many other critical commodities even as global growth has slowed. The price of Brent crude oil, for example, surged to $91 per barrel earlier this month — nearly $34 per barrel above the 2015-2019 average.
The CMO projected that Brent prices will average $84 per barrel in 2024 before declining to an average of $79 in 2025, assuming no conflict-related supply disruptions.
Published in Dawn, April 26th, 2024
