According to the Commodity Markets Outlook report recently released by the World Bank, global commodity prices will fall at the fastest rate since the outbreak of the Covid-19 pandemic.
Overall, the prices of commodities in 2023 are expected to plummet 21% from last year. Energy prices are expected to slump by 26% this year. But while food prices are expected to drop 8% this year, they will still be at the second-highest level since 1975. In real terms, food prices are now the highest in the past 50 years.
Nonetheless, commodity prices will remain above their average levels during 2015-2019. Ayhan Kose, Director of the Prospects Group of World Bank, said that the decline in commodity prices will help reduce the overall global inflation rate. But central banks still need to be cautious, as factors such as weak oil supplies, geopolitical crises and extreme weather could lead to higher prices and inflationary pressures.
The World Bank report also pointed out that commodity prices still face many uncertainties. For example, oil supply from Russia and OPEC could be lower than expected, tighter credit conditions could hamper the ability of oil or coal companies to increase supply elsewhere, and tighter regulation of fossil fuels could discourage related investment. Geopolitical concerns are also an important factor affecting commodity prices. Additionally, concerns over adverse weather could also push commodity prices higher, given that a drought in Europe in the summer of 2022 has severely impacted river flows and food production.
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