Global food and fuel price shocks linked to the Russia-Ukraine war are set to last until at least the end of 2024 and raise the risk of stagflation, the World Bank said on Monday (25) in its latest Commodities Market Outlook report.
In its first comprehensive analysis of the war’s impact on commodity markets, the bank said the world is facing the biggest commodity price shock since the 1970s, which is being aggravated by restrictions on food, fuel and fertiliser trade- that are now exacerbating already elevated inflationary pressures around the world.
Russia is the world’s largest natural gas and fertiliser exporter, and second largest crude oil exporter. Together with Ukraine, it accounts for nearly a third of global wheat exports, 19 percent of corn exports and 80 percent of sunflower oil exports.
Production and exports of these and other commodities have been disrupted since Russia’s invasion of Ukraine.
As a result, the World Bank expects energy prices to rise more than 50 percent in 2022 before easing in 2023 and 2024, while non-energy prices, including agriculture and metals, are seen climbing by almost 20 percent in 2022 before moderating.
The bank said commodity prices will only retreat slightly and stay well above the most recent five-year average for the medium term.
“In the event of a prolonged war, or additional (Western) sanctions on Russia, prices could be even higher and more volatile than currently projected,” it said.
“Policymakers should take every opportunity to increase economic growth at home and avoid actions that bring harm to the global economy,” said Indermit Gill, the World Bank’s Vice President for Equitable Growth, Finance, and Institutions.
In terms of policy responses to the crisis, the bank singled out tax cuts and subsidies that it said tend to exacerbate supply shortfalls and price hikes, calling instead for school feeding programmes as well as cash transfers and public employment programmes for disadvantaged groups.
To use this website you must be aged 18 years or over. Please verify your age before entering the site.
