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.
However, the CMO noted that there was a danger to the downside, particularly for industrial commodities, due to weak global growth. It was warned that further trade restrictions and an intensified El Niño could result in increased food costs.
Alerts: ME tensions may hinder global efforts to reduce inflation.
According to the research, the sharp decline in global commodity prices that last year significantly reduced total inflation is finally leveling off. This may make it more difficult for central banks to swiftly lower interest rates.
According to World Bank projections, global commodity prices will fall by 3% in 2024 and 4% in 2025. The majority of countries’ inflation targets are still being exceeded by that rate, therefore it won’t be significantly reduced. It will maintain commodities prices at an average 38 percent higher than those of the five years preceding the Covid-19 epidemic.
Chief Economist and Senior Vice President of the World Bank Group Indermit Gill declared, “Global inflation remains undefeated.” “Declining commodity prices, a major driver of disinflation, have essentially reached a wall. This implies that interest rates might stay higher than anticipated for this year and the following year. The globe is at a crossroads where much of the work made in the last two years to reduce inflation might be undone by a significant energy shock.
Even if global economy has slowed over the past two years, the price of oil and many other essential commodities has continued to rise due to persistently elevated geopolitical tensions. For instance, earlier this month, the price of Brent crude oil rose to $91 per barrel, approximately $34 per barrel more than the average price from 2015 to 2019.
Assuming no supply disruptions due to conflicts, the CMO predicted that Brent prices will average $84 per barrel in 2024 before falling to an average of $79 in 2025.
