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Commodity price shocks

Shanta Devarajan's picture

The steep decline in the prices of commodities (oil, minerals, metals) following the global financial crisis is clearly having an effect on African countries. But the effect is asymmetric between importers and exporters of commodities. For instance, oil importers, who suffered in 2008 from the sharp increase in oil prices (reaching $140 a barrel), will benefit from the decline in oil prices, whereas the reverse is true for oil exporters. Using the latest commodity forecasts available, my colleague Cristina Savescu  has calculated the size of the terms of trade shock (expressed as a percentage of 2006 GDP) for African countries in 2008 and 2009. As the summary table below indicates, the rankings are almost completely reversed: the countries with the most favorable terms of trade shocks in 2008 (“top five”) are among those with the most negative in 2009 (“bottom five”), and vice-versa.

Terms of trade shocks (percent of 2006 GDP)
  2008/2007   2009/2008
Top five      
Equatorial Guinea 32.5 Seychelles 5.4
Angola 21.9 Eritrea 3.8
Congo, Rep. 19.3 Togo 3.6
Gabon 17.9 Comoros 2.2
Mauritania 16.3 Senegal 2.2
       
Bottom five    
Togo -6.1 Nigeria -10.2
Senegal -6.2 Gabon -12.5
Cape Verde -6.8 Congo, Rep. -13.6
Eritrea -9.8 Angola -15.1
Seychelles -10.5 Equatorial Guinea -20.9

 

Comments

Submitted by D. Watson on
"But the effect is asymmetric between importers and exporters of commodities." I would say that the effect is exactly symmetric. The same countries that benefit from high prices lose from low prices and vice versa. They are the mirror image of each other. How is this asymmetric?

Submitted by Bernabe Sanchez on
The documentation for the IMF External Shock Facility approved for Malawi in December shows the following Terms of Trade changes: 2008 - minus 3.8% of GDP 2009 - plus 4.4% of GDP So Malawi should be at least in the second list. Worth exchanging notes with your colleagues across the road in DC?

Submitted by abiodun akintayo on
i`m taking a cue from D Watson, the effect should be seen as symmetric. The exporting countries especially the oil commodity exporters(in Africa) gained considerably from the sharp price increase in 2008. They really shouldnt complain now but should have prepared themselves for what is happening now.Human beings just make things complex for no reason,a simple basic as "what goes around comes around" would have helped.

Those with good performance last year have the poorest performance today. It’s the other way around since the occurrence of global crisis. Company has their own peak and lean season. The prices of basic commodities do fluctuate, before the global recession hit the world, the price of gasoline had gone up to $140 per barrel it is more likely favorable to oil and gas industry. Thus there is a need for additional capital to refinance most of the delinquent company. Just like the celebration of April Fool’s day that require payday loans to pull off. At any rate, be safe with joviality on this occasion, so no one needs payday loans to clean up after April Fool's Day.

Submitted by Miguel on
The crisis has changed usual way people live and work. Increase in surplus production capacity is also contrary to future sustainable appreciation of crude oil. Now stocks of crude oil by about 15% over the past cyclical peak. Global recession seriously hampering demand. Energy Information Agency (EIA) has once again revised its annual forecast on demand for downward. It should be remembered that last year's increase to 140 dollars a barrel reached in the period when the rate of capacity utilization approaching the mark of 99%. In the current situation of surplus production capacity is growing at a reduction in global demand. This concerns also commodity prices, because everything is depending on capacities and current needs.

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