We face big challenges to help the world’s poorest people and ensure that everyone sees benefits from economic growth.
The increase in energy prices over the past two years has been the largest since the 1973 oil crisis.
As was the case then, the shock is being aggravated by a surge in restrictions in trade of food, fuel and fertilizers,” said Indermit Gill, the World Bank’s Vice President for Equitable Growth, Finance, and Institutions.
Non-energy prices, including agriculture and metals, are projected to increase almost 20 percent in 2022 and will also moderate in the following years.
Because of war-related trade and production disruptions, the price of Brent crude oil is expected to average $100 a barrel in 2022, its highest level since 2013 and an increase of more than 40 percent compared to 2021.
“Commodity markets are experiencing one of the largest supply shocks in decades because of the war in Ukraine,” said Ayhan Kose, Director of the World Bank’s Prospects Group, which produces the Outlook report.
Metal prices are projected to increase by 16 percent in 2022 before easing in 2023 but will remain at elevated levels.
“Commodity markets are under tremendous pressure, with some commodity prices reaching all-time highs in nominal terms,” said John Baffes, Senior Economist in the World Bank’s Prospects Group.
In addition, policy responses so far have focused more on tax cuts and subsidies—which often exacerbate supply shortfalls and price pressures—than on long-term measures to reduce demand and encourage alternative sources of supply.
This diversion will likely be more costly, the report notes, because it involves greater transportation distances—and coal is bulky and expensive to transport.
High metal prices are also driving up the cost of renewable energy, which depends on metals such as aluminum and battery-grade nickel.
It calls for targeted safety-net programs such as cash transfers, school feeding programs, and public work programs—rather than food and fuel subsidies.
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