World Bank statement on global commodity prices
The World Bank stated that global commodity prices have stabilized following last year's sharp decline, noting that this situation could make it difficult for central banks to lower interest rates quickly. The report mentioned that if the conflict in the Middle East escalates further, disruptions in oil supply could drive global inflation upward.
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The World Bank has published the April 2024 edition of its "Commodity Markets Outlook" report.
The report stated that global commodity prices fell by approximately 40 percent between mid-2022 and mid-2023, which played a decisive role in reducing general inflation last year.
Noting that the World Bank's commodity price index has remained essentially unchanged since mid-2023, the report provided information that, assuming no further flare-ups in geopolitical tensions, a 3 percent decline in global commodity prices is projected for this year, and a 4 percent decline for 2025.
The report emphasized that this pace would have very little effect on suppressing inflation, which remains above central bank targets in most countries, and that it could become difficult to lower interest rates quickly.
BRENT CRUDE OIL BARREL PRICE...
It was stated that geopolitical tensions, which have remained persistently high over the past two years, have supported the prices of oil and many other critical commodities, and that in the absence of supply disruptions stemming from conflicts, the average price of a barrel of Brent crude oil is estimated to be 84 dollars this year and 79 dollars next year.
The report pointed out that if the conflict in the Middle East escalates further, disruptions in oil supply could drive global inflation upward, assessing that a moderate supply disruption could push the price to 92 dollars, while a more serious disruption could raise the price of Brent crude oil above 100 dollars, potentially causing global inflation to rise by nearly 1 percentage point.
GEOPOLITICAL CHALLENGES EXPECTED TO SUPPORT GOLD PRICES
The report, which states that the average price of gold, a popular choice for investors seeking a "safe haven," is expected to reach a record high in 2024 before experiencing a slight decline in 2025, noted that rising geopolitical challenges, along with strong demand from central banks in developing countries, are expected to support gold prices throughout this year.
The report stated that an escalation of conflicts in the Middle East could also increase natural gas, fertilizer, and food prices.
Pointing out that accelerating investments in green technologies are increasing the prices of base metals critical for the global transition to clean energy, the report stated that copper prices are expected to rise by 5 percent and aluminum prices by 2 percent in 2024.
In the statement made by the Bank regarding the report, World Bank Group Chief Economist Indermit Gill stated that global inflation remains invincible, noting, "The decline in commodity prices, which is the main force for lowering inflation, has actually hit a wall. This means that interest rates may remain higher this year and next year than currently expected."
Pointing out that the world is going through a sensitive period, Gill drew attention to the fact that a major energy shock could undermine most of the progress made in reducing inflation over the last 2 years.
World Bank Group Deputy Chief Economist Ayhan Köse also noted that central banks should be cautious about the inflationary effects of sudden spikes in commodity prices amidst rising geopolitical tensions.