Commodity prices threat to wellbeing—World Bank

The World Bank has painted a gloomy picture of commodity prices in developing countries including Malawi, a situation it says could stall poverty reduction.

In its April Commodity Markets Outlook published last week, the bank said inflation in States with higher commodity prices, which already have elevated inflationary pressures mainly due to the Russia-Ukraine war, would be more volatile than currently projected.

In a statement accompanying the report, World Bank senior economist John Baffes said commodity markets are under tremendous pressure, with some reaching all-time highs in nominal terms.

“This will have lasting knock-on effects. The sharp rise in input prices, such as energy and fertilisers, could lead to a reduction in food production, particularly in developing economies.

“Lower input use will weigh on food production and quality, affecting food availability, rural incomes, and the livelihoods of the poor.”

According to the bank, energy prices are expected to rise more than 50 percent in 2022 before easing in 2023 and 2024. On the other hand, non-energy prices, including agriculture and metals, are projected to increase almost 20 percent in 2022 and will moderate in the following years.

The bank forecasts, wheat prices to increase more than 40 percent, reaching an all-time high in nominal terms this year, a situation which will put pressure on developing economies that rely on wheat imports, especially from Russia and Ukraine.

Commenting on the increasing commodity prices, Consumers Association of Malawi executive director John Kapito said while they are inevitable in view of the global economic shocks, the fact is that Malawians are being heavily affected and continue failing to access the most basic commodities.

Meanwhile, Reserve Bank of Malawi has indicated that the Russia-Ukraine war has jeopardised its prospects of supporting economic recovery, forcing it to revisit the monetary policy stance.

According to the bank, unless there are interventions to reverse the soaring prices for energy, fertiliser, wheat and other related commodity prices, heightened inflation pressures could persist in 2022.

Presently, the cost of living in the country has continued to rise with latest figures showing they have risen by an average 5.45 percent to K255 593 in March largely propelled by a rise in food prices.