The World Bank has warned that global energy prices will skyrocket, culminating in the largest price spike in commodities in nearly a half-century.
Global energy prices, which have already risen dramatically due to ongoing Covid-19 lockdowns in China and the Russia-Ukraine conflict, are expected to rise by 50.5 percent in 2022, according to the bank’s April Commodity Markets Outlook report.
This amounts to the largest commodity shock we’ve experienced since the 1970s. As was the case then, the shock is being aggravated by a surge in restrictions in trade of food, fuel, and fertilizers,” the World Bank’s Vice President for Equitable Growth, Finance, and Institutions, Indermit Gill, said in a statement accompanying the report released on Tuesday.
The report points out that sanctions imposed on Russia have undermined global trade in commodities, having triggered huge energy-price increases. Food prices are projected to increase by 22.9% this year as well, the most since 2008, as wheat prices jump 40% to record highs.
“That will put pressure on developing economies that rely on wheat imports, especially from Russia and Ukraine,” the World Bank said.
Ukraine was expected to produce 10% of the world’s wheat in 2022, but the institution says anywhere from 25% to 50% of that production has been affected by the conflict.
Meanwhile, metal prices are expected to grow by 16% before easing next year but will reportedly remain at elevated levels.
According to the report, surging commodity prices have contributed to inflation levels not seen in more than 40 years in the US, and a record 7.5% jump in consumer prices in Europe.
“These developments have started to raise the specter of stagflation. Policymakers should take every opportunity to increase economic growth at home and avoid actions that will bring harm to the global economy,” Gill said.