According to World Bank forecasts, the consequences of the Russian military intervention in Ukraine and the energy situation could be longer than in previous crises. Analysts say the global economy has entered the era of the strongest commodity shock since the 1970s. The bell .
This is stated in Commodity Market Outlook Review .
The essentials of the WB’s forecasts:
Energy prices will rise by more than 50% in 2022 and non-energy goods by nearly 20%, analysts say. In 2023-2024, commodity prices will decline, but remain above the five-year average. The average annual price of Brent oil in 2022 will increase by 42%, to $100 per barrel, and decrease to $92 per barrel in 2023.
Widening EU sanctions against Russia could lead to serious disruptions in the oil market, warns the World Bank. The IMF has already said so.
Replacing fossil fuels with clean energy sources under current conditions is delayed, analysts say. This is largely due to the rising prices of aluminum and nickel needed for alternative energy – in 2022 their price will increase by 37% and 51%, respectively.
In general, metal prices will increase by 16% this year. Moreover, for base metals (including iron, nickel, aluminum, copper) – by more than 22%, and for precious metals (including gold, silver, platinum) – only 3%.
Rising gas prices (in Europe – by 111%) will lead to an increase in the price of fertilizers by almost 70%, adds the WB. This, in turn, will lead to an increase in the cost of agricultural products.
Food prices in 2022 will increase on average by almost 23%, wheat – by more than 40%. Of all types of agricultural products, palm oil will see the highest price increase, by more than 45%.
In 2023, food prices will fall by more than 10% due to an increase in the supply of wheat from Argentina, Brazil and the United States, predicts the WB. However, sustained high fertilizer prices can hamper increased food production.
In addition, the World Bank warns that the tax cuts and subsidies currently being implemented by countries instead of long-term measures can only worsen the situation. And the restructuring of logistics will lead to prolonged inflation.