- By the end of March this year, commodity prices were roughly 30 per cent below their June 2022 peak.
- The lender however notes that food prices still remain near record highs, compounding food insecurity.
Image: FILE
The World Bank has now projected that commodity prices will decline at the fastest clip this year since the onset of Covid-19 in 2020.
In its latest quarterly commodity markets outlook report, for the first three months to March this year, the global lender notes commodity prices fell by 14 per cent.
“By the end of March this year, they were roughly 30 per cent below their June 2022 peak,” World Bank says.
The lender however notes that food prices still remain near record highs, compounding food insecurity.
It attributes the unwinding of prices to the combination of slowing economic activity, favourable weather and a global reallocation of commodity trade flows.
“However, we expect the commodity prices to fall by about 21 per cent in the remaining period this year and remain mostly stable in 2024, although the outlook is subject to multiple risks and a highly uncertain environment,” the lender says in part.
In Kenya, consumers have been grappling with commodity price hikes since 2020.
The annual inflation rate however dropped to a ten-month low of 7.9 per cent last month, from 9.2 per cent in March, a picture that could be pointing towards the lenders' projection of commodity prices easing in the remaining period of the year.
Further, data by the Food and Agriculture Organisation notes the food price index has dropped significantly for the first three months this year from 130.3 in January to 126.9 in March.
"Year-to-date, the index has dropped by about 21 per cent from 159.7," FAO says.
Cereals and cooking oil price index have also dropped year-to-date by about 19 per cent and 48 per cent respectively, according to the organisation.
The lender notes that the little respite from the declining commodity prices could be essential in clouding the growth prospects of almost two-thirds of developing economies, that depend on commodity exports.
The drop is further expected to bring some relief to the nearly 350 million people across the world who face food insecurity.
Although food prices are expected to fall by about eight per cent in 2023, they will be at the second-highest level since 1975.
According to World Bank’s chief economist and senior vice president for development economics Indermit Gill, the decline in commodity prices will be of little comfort to consumers in many countries.
"In real terms, food prices will remain at one of the highest levels of the past five decades. Therefore governments should avoid trade restrictions and protect their poorest citizens using targeted income-support programs rather than price controls," Gill said.