The war in Ukraine represents “the biggest commodity shock we have seen since the 1970s,” the World Bank said in a Tuesday report on rising food and energy prices, saying the latter will “maintain at historically high levels until the end of 2024”.
For energy prices alone, the Bank expects an increase of more than 50% this year before falling in 2023 and 2024. As for those of non-energy goods, such as agricultural products and metals, they should increase by almost 20% in 2022, then also decrease in the following years. “However, commodity prices (sold for production or consumption in natural or standardized form) are expected to remain well above the average of the past five years and, in the event of a prolonged war or new sanctions against Russia, they could become even higher and more volatile than what is currently expected”, warns the institution.
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“The war in Ukraine has caused a major shock to commodity markets and changed the pattern of global trade, production and consumption,” the report notes. “This shock is compounded by an upsurge in restrictions on trade in food, fuel and fertilizers,” said Indermit Gill, World Bank Vice President for Equitable Growth, Finance and Institutions, adding that this raises concerns. “specter of stagflation”. A term for an economy that simultaneously suffers from low or no economic growth and high inflation.
The authors of the report point out that the increase in energy prices over the past two years has been the largest since the 1973 oil crisis and “that of food raw materials – of which Russia and Ukraine are major producers – and fertilizers, whose production depends on natural gas, has never been so strong since 2008”. These price increases have “a considerable human and economic cost and risk hampering progress in poverty reduction”, also deplores the World Bank.