Most commodity prices will drop substantially in 2020: World Bank
#GS3 #Economy
Energy prices may average at 40% lower than in 2019
- COVID-19 is projected to bring most commodity prices down substantially in 2020 in ‘April Commodity Markets Outlook’.
- Prices of energy and metals have been worst hit. While there has been only a moderate impact on the agricultural commodities outlook, supply chain disruptions and export restrictions and stockpiling by governments have raised food security concerns.
- The outlooks are “exceptionally uncertain” and depend on the severity and duration of the pandemic and when mitigation measures are unwound.
- Energy prices, which fell 18.4% quarter-on-quarter in 2020 Q1, are expected to average at 40% lower in 2020 than in 2019.
- With crude benchmarks trading at below zero earlier this week, the bank projects oil prices to average at $35 per barrel in 2020.
- This reflects a historically large expected drop in oil demand of 10%. Non-energy prices are expected to fall 5% in 2020 and stabilise next year. Metal prices are expected to fall 13% and rebound modestly next year.
- Agricultural prices are likely to stay broadly stable in 2020 because of relatively stable demand and all-time high levels of staple production and stock.
- However, supply chain disruptions and trade policy announcements and stockpiling could create food shortages.
- Policymakers must resist the urge to impose trade restrictions and actions that put food security at risk, as the poor would be hit the hardest.
