The World Bank has warned that prices of commodities are projected to rise by 20 per cent or more in 2018.
Some of the commodities that fall in this category are crude oil, natural gas, coal and agricultural among others.
The global financial institution projected that oil prices were expected to rise from $53 a barrel as at the end of 2017 to average $65 a barrel over 2018.
This would be based on strong demand from consumers and restraint by oil producers.
While the prices of natural gas and coal are forecast to jump by 20 per cent, the metals prices are expected to rise by nine per cent this year, also on a pickup in demand and supply constraints.
Agricultural commodities, including food commodities and raw materials, are anticipated to see a price rise of over two per cent this year on diminished planting prospects.
The Acting Chief Economist and Senior Director, Development Economics, World Bank, Mr. Shantayanan Devarajan, said, “Accelerating global growth and rising demand are important factors behind broad-based price increases for most
commodities and the forecast of higher commodities prices ahead. At the same
time, policy actions currently under discussion add uncertainty to the
outlook.”
He added that grains, oils and meal prices were expected to rise in 2018, mostly due to lower planting intentions. According to him, the mild La Niña cycle that extended into the early part of the year only affected banana production in Central America and soybean production in Argentina and did not impact global markets for those crops
substantially.
The Senior Economist and lead author of the Commodity Markets Outlook, Mr. John Baffes, said, “Oil prices have more than doubled since early 2016, as the large overhang of
inventories has been reduced significantly.
Strong oil demand and greater compliance by the
Organisation of Petroleum Exporting Countries and non-OPEC producers with their agreed output pledges helped tip the market
into deficit.”
Baffes explained that a special focus section examined the changed landscape for oil-exporting economies after the 2014 oil price
collapse.
He added that the oil price plunge eroded oil-related revenues, forcing abrupt cuts in government spending that accentuated the slowdown in private sector activity in many
regions. Income inequality and political instability also weakened the ability of some oil-exporting economies to weather low oil
prices.
