World Bank sees ‘significant’ inflation risk from high energy prices -Breaking
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By Andrea Shalal
WASHINGTON, (Reuters) – After surging over 80% in 2021 and fueling substantial near-term risk to global inflation, energy prices will likely rise in 2022, according to the World Bank’s latest Commodity Markets Outlook released Thursday.
Multilateral development banks said that energy prices would begin to drop in the second quarter of 2022, as supply restrictions ease. Other prices such as metals and agriculture will also start to decrease following strong gains in 2021.
Ayhan Kose is chief economist at the World Bank’s Prospects Group and the director of its Outlook report. He stated that “the surge in energy prices presents significant near-term risk to global inflation” and could have a negative impact on the growth in countries that import energy.
The sharp rebound in commodity price is more apparent than originally thought. Recent volatility in prices may complicate policy choices as countries recover from last year’s global recession.”
According to the bank, some commodities prices have risen or exceeded 2021 levels not seen in a decade since an earlier spike.
The bank stated that natural gas and coal prices reached new highs due to supply shortages and rebounding electricity demand. However, they will decline in 2022 as supply increases and demand decreases.
Given the current shortages of supplies and low inventory, further price rises may occur soon. Additional risk factors include extreme weather, uneven COVID-19 recoveries and the possibility of new outbreaks.
It stated that higher food prices are also raising food-price inflation, which raises questions about food security and food safety in many developing countries.
In 2022 prices were projected to reach $74/bbl, buoyed in part by stronger demand at $70/bbl 2021 and then falling to $65/bbl 2023.
Although crude oil is a viable substitute, it poses a significant upside risk for the global demand outlook. However, higher energy prices could start to impact global growth.
According to the bank, there will be a 5% decrease in metals prices after an increase of 48% in 2021. The bank predicted that agricultural prices would fall modestly in the next year following a jump of 22% this past year.
The warning stated that climate change could cause changes in weather patterns, which can affect both supply and demand.
According to the report, countries can benefit from accelerating renewable energy source installation and reducing their dependence on fossil fuels.
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