Global commodity prices have experienced declines during H1’2017, contrary to expectations of a recovery.
Most commodities that lost in H1’2017 included energy, metals & minerals and agriculture, whose prices declined by 6.0 percent, 1.8 percent, and 0.2 percent YTD, respectively, according to the World Bank Commodity Prices Index.
Oil prices have also declined by 5.2 percent YTD to USD 49.9 per barrel from USD 52.6 per barrel, owing to oversupply from the US shale oil market and African countries such as Nigeria and Libya. The decline in commodity prices is set to take a toll on economic growth of commodity-driven economies. Oil importing countries such as Kenya are likely to benefit from this with lower local prices and improvements in their current account balances. Below is a chart showing the performance of select commodity prices, with (17.4 percent), (3.2 percent) and (1.0 percent) for energy, metals & minerals and agriculture performance, respectively, over the last 2-years.
The report further stated that growth continues to be robust among commodity importers. Windfalls from the recent decline in commodity prices are waning, but accommodative policies are supporting domestic demand and export growth is being bolstered by a recovery in global trade. The forecast for growth in commodity importers remains stable, at an average of 5.7 percent in 2017-19.
In low-income countries, growth is rebounding, as rising metals prices lift production in metals exporters and infrastructure investment continues in non-resource-intensive economies. However, some low-income countries are still struggling with declining oil production, conflict, drought, and security and political challenges. Growth in low-income countries is expected to strengthen during 2017-19, as activity firms in commodity exporters.