Global commodity prices continued their recovery in the first quarter of 2021 and are expected to maintain their progress throughout the year, stated the World Bank (WB).
In its semi-annual commodity markets outlook report, the WB attributes its expectation to the global economic rebound and improved growth prospects.
“However, the outlook is heavily dependent on progress in containing the COVID-19 pandemic as well as policy support measures in advanced economies and production decisions in major commodity producers,” said the report.
The WB expects global energy prices to average more than one-third higher during 2021 than in 2020, with oil averaging $56 a barrel.
It also projects prices of metal and agricultural products to jump by 30 percent and 14 percent, respectively.
The report notes that almost all commodity prices are now above pre-pandemic levels due to the upsurge in economic activity and some specific supply actors, particularly for oil, copper, and some food commodities.
Global growth has been stronger than expected so far and vaccination campaigns are underway -- trends that have buoyed commodity prices -- said Ayhan Kose, WB Group acting vice president for equitable growth, finance and institutions and director of the Prospects Group.
Yet, Kose noted that the durability of the recovery is highly uncertain, adding that emerging markets and developing economies, both commodity exporters and importers, should strengthen their short-term resilience and be ready for the possibility of growth losing momentum.
The report added that global crude oil prices rebounded from record lows posted during the pandemic, supported by a rapid global economic recovery and continued production cuts by the Organisation of the Petroleum Exporting Countries (OPEC) and its partners.
Accordingly, the report expected oil demand to firm over 2021 as vaccines become widely available, especially in advanced economies, pandemic restrictions are eased, and the global recovery is sustained.
Oil prices are projected to average $60 a barrel in 2022, but, failing to contain the pandemic will lead to a further deterioration in demand that could put pressure on prices, according to the report.
Meanwhile, COVID-19 implications on food insecurity are expected to remain in 2021 and 2022, despite the recent stability in food commodity prices globally, stated the report.
“Although food commodity markets are well supplied globally, COVID-19 has severely impacted local labour and food markets around the world, reducing incomes, disrupting supply chains, and intensifying food and nutrition security issues that were present even before the pandemic struck. It is high time for policymakers to address the underlying sources of food insecurity,” Kose said.