The World Bank cautions that there will be additional economic problems for the world. The world bank stated yesterday from its headquarters in Washington, DC, that the rising cost of food and fuel is contributing to the food and energy problems that many developing countries are already experiencing.
According to the most recent Commodity Markets Outlook report from the World Bank, currency depreciations, nearly 60% of oil-importing emerging-market and developing economies recently experienced an increase in domestic oil prices, and nearly 90% of the economies experienced an increase in wheat prices that was greater in local currency terms than the increase in U.S. dollars.
It emphasized how rising energy commodity prices, which are used as inputs in agricultural production, have contributed to rising food prices.
Pablo Saavedra, vice president for equitable growth, finance, and institutions at the World Bank, responded to the findings by saying: “Although many commodity prices have retreated from their peaks, they are still high compared to their average level over the past five years. A further spike in world food prices could prolong the challenges of food insecurity across developing countries. An array of policies is needed to foster supply, facilitate distribution, and support real incomes.”
Energy costs have been highly unpredictable since the start of the conflict in Ukraine, but they are currently anticipated to fall. Energy prices are anticipated to drop 11% in 2023 after rising by around 60% in 2022.
Despite this cooling, energy costs will still be 75% higher than they were on average over the previous five years in 2019. In 2023, the price of Brent crude oil is predicted to be on average $92 per barrel, significantly higher than the $60 per barrel five-year average.
Prices for coal and natural gas are expected to decline in 2023 after reaching record highs in 2022. While European natural gas costs could be nearly four times higher by 2024, Australian coal and U.S. natural gas prices are still anticipated to be double their average over the previous five years.
As a result of several key exporters increasing their output, coal production is expected to rise dramatically, endangering efforts to combat climate change.
Ayhan Kose, the Chief Economist at EFI and Director of the World Bank’s Prospects Group, made the following remarks on the Outlook report: “The combination of elevated commodity prices and persistent currency depreciations translates into higher inflation in many countries. Policymakers in emerging markets and developing economies have limited room to manage the most pronounced global inflation cycle in decades. They need to carefully calibrate monetary and fiscal policies, clearly communicate their plans, and get ready for a period of even higher volatility in global financial and commodity markets.”
According to the analysis, agricultural prices are predicted to drop by 5% in 2019 while wheat prices will drop by nearly 20% in the third quarter of 2022 but would still be 24% higher than they were in the same period in 2019.
Senior Economist John Baffes of the World Bank’s Prospects Group responded as follows: “The forecast of a decline in agricultural prices is subject to an array of risks,” “First, export disruptions by Ukraine or Russia could again interrupt global grain supplies. Second, additional increases in energy prices could exert upward pressure on grain and edible oil prices. Third, adverse weather patterns can reduce yields; 2023 is likely to be the third La Niña year in a row, potentially reducing yields of key crops in South America and Southern Africa.”
As the energy transition takes place and demand switches from fossil fuels to renewables, the research also noted that worries about a potential global recession in 2019 have already contributed to a steep decrease in copper and aluminum prices. This will be advantageous to some metal producers.