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commodity prices

Despite low commodity prices, growth prospects in low-income countries remain robust

Gerard Kambou's picture
Large agricultural sectors, remittances, and public investment have cushioned the impact of sharply weaker terms of trade in commodity-exporting low-income countries (LICs). Growth in LICs was flat in 2014, but is expected to pick up in 2015 and remain robust during 2016–17.  Declining commodity prices, however, are likely to increasingly put pressure on fiscal and current account balances of LICs that rely heavily on exports of energy and metals. Many commodity-exporting LICs have limited buffers to absorb this deterioration.

On booms and super-cycles: China and India's central role in global commodity markets

John Baffes's picture
Global commodity prices underwent an exceptionally strong and sustained boom beginning in 2000. Unlike a typical price cycle, this boom has been characterized as a “super cycle”, i.e., a demand-driven surge in commodity prices lasting possibly decades rather than years. Many researchers say this is the fourth “super cycle” of the past 150 years. The price super cycle has been attributed to strong growth in emerging markets.

Commodities (mostly) continue to tumble

John Baffes's picture

We just published our Commodity Market Outlook for the third quarter of 2015, and report that most prices declined in the second quarter of 2015 due to ample supplies and weak demand, especially in industrial commodities (see figure below).
 

 
Energy prices rose 12 percent in the quarter, with the surge in oil offset by declines in natural gas (down 13 percent) and coal prices (down 4 percent). However, energy prices fell on average to 39 percent below 2014 levels. Natural gas prices are projected to decline across all three main markets—U.S., Europe, and Asia—and coal prices to fall 17 percent. Excluding energy, our report notes a 2 percent decline in prices for the quarter, and forecasts that non-energy prices will average 12 percent below 2014 levels this year. Iran’s new nuclear agreement with the US and other leading governments, if ratified, will ease sanctions, including restrictions on oil exports from the Islamic Republic of Iran. Downside risks to the forecast include higher-than-expected non-OPEC production (supported by falling production costs) and continuing gains in OPEC output. Possible (less likely) upside pressures may come from closure of high-cost operations—the number of operational oil rigs in the US is down 60 percent since its November high, for example—and geopolitical tensions. 

What does the end of the commodity boom mean for poverty in Latin America?

Liliana Sousa's picture
Latin America and the Caribbean (LAC) has made significant gains in poverty reduction in the 2000s - by 2013 less than a quarter of the region’s population lived on less than $4 a day and just over one in ten on less than $2.50 per day. While this implies that millions are still living in poverty, it is a big reduction from the early 2000s where more than 40 percent lived on less than $4 per day and over a quarter on less than $2.50. In the Poverty team at the World Bank, we are constantly finding that the single biggest driver of these gains has been increased labor income.

Commodity Markets Outlook - January 2014

John Baffes's picture
 
The World Bank just published its January 2014 Commodity Outlook. With the exception of energy, all the key commodity price indices declined significantly in 2013. Fertilizer prices led the decline, down 17.4 percent from 2012, followed by precious metals (down almost 17 percent), agriculture (-7.2 percent), and metals (-5.5 percent).

Elephants and Macro-Financial Linkages

Otaviano Canuto's picture
Global financial integration and the linkages between the financial and the real sides of economies are sources of huge policy challenges. This is now beyond doubt, after what we saw in the run-up to and the unfolding of the 2008 global financial crisis.

Prospects Weekly: Renewed Euro Area tensions cut into capital flows to developing countries in May and June

Global Macroeconomics Team's picture

Renewed Euro Area tensions cut into capital flows to developing countries in May and June, and prompted a sharp downturn in business sentiment worldwide. Together these developments point to slower growth in 2012Q2 and Q3, unless recent improvements in financial markets and policy steps cause business sentiment to strengthen.

Prospects Daily: Bank deposits are moving out of riskier European countries

Global Macroeconomics Team's picture

Important developments today:

1. Bank deposits are moving out of riskier European countries.

Prospects Weekly: Global financial markets are eager for policy action

Global Macroeconomics Team's picture

Global financial markets are eager for policy action. Bond yields for high-spread Euro Area sovereigns remain high, but eased somewhat this week with successful bond issuances by France and Spain and optimism that EU leaders will reach agreement to resolve the debt crisis at the forthcoming December 9th EU summit.

Prospects Weekly: Financial market volatility remains sharply elevated

Global Macroeconomics Team's picture

Financial market volatility remains sharply elevated this week as market attention shifted from Greece, to Italy and even France. Concern about counterparty risk kept European banking-sector spreads high, even as banks mark-down and sell-off distressed Euro Area sovereigns to repair their capital base. Continued turbulence and credit tightening could prompt sudden reversals in global capital markets. In 2012, developing country external financing requirements are estimated at $1trn (7.1% of GDP), of which two-thirds is accounted for by short-term debt. Developing Europe and Central Asia, with debts coming due equal to 7.6% of GDP, is the developing region most vulnerable to a tightening of financial conditions. Worries about faltering world demand, led by expectations of recession in Europe, have contributed to deep declines in international commodity prices.


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