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World Bank paints gloomy outlook

Commodity prices have risen to high levels by historical standards. Energy prices have increased sharply, especially for natural gas and coal, while most non-energy prices have plateaued after steep increases earlier in the year. Crude oil prices are forecast to average $74/bbl in 2022, up from a projected $70/bbl in 2021. After registering more than 48 percent increase this year, metal prices are projected to decline 5 percent in 2022. Agricultural prices, which are projected to rise more than 20 percent this year, are expected to broadly stabilize in 2022. These forecasts are subject to substantial risks, from adverse weather, further supply constraints, or additional outbreaks of COVID-19. Energy prices are particularly at risk of additional volatility in the near-term given low inventory levels.

By Justin Mkweu

World Bank says economic outlook across the globe is murky and characterised by rising energy prices, inflation and a decline in prices of agricultural products.

This is contained in the bank’s October Economic Outlook report issued this week.

According to the institution, agriculture, fertilisers and precious metals are about one-third above their pre-pandemic levels while metals and minerals are around one-half higher.

Energy prices rose by 16 percent in the third quarter of this year continuing their upward trajectory since the start of the year, with natural gas and coal prices rising much faster than crude oil prices and agricultural commodity prices stabilised.

The bank predicts that energy prices are expected to increase by more than two per cent in 2022 after jumping more than 80 per cent in 2021, supported by continued robust demand and gradual production gains, before falling sharply in 2023 as supply increases measurably.

Oil prices are forecast to average $74 (approximately K60,927 at current exchange rate) per barrel in 2022, up from a projected $70 (K57,680) per barrel in 2021, before dropping to $65 (K53,560) per barrel in 2023.

Oil demand is expected to continue its recovery and reach its pre-pandemic level by the second half of 2022.

“Increasing energy prices pose significant inflation risks in many Emerging Markets and Developing Economies and could weigh on growth in 2022 among energy-importing countries,” warns the report.

Recently, Malawi has seen economic fluctuations such as rising prices of fuel, widening import cover, the depreciation of kwacha, rising inflation, rising debt and dwindling import cover among others.

Speaking in an earlier interview, Consumers Association of Malawi John Kapito backed the recent rise in fuel prices in the country indicating that world over the trend has been the same.

Kapito further advised government to put in place mechanisms that will protect Malawi from other external shocks such as rising prices of goods on the international market.

Private sector mouthpiece Malawi Confederation of Chambers of Commerce and Industry president James Chimwaza said in an interview that unless the country places substitutions on some products that can be locally produced, it will continue suffering external shocks.

“There is a lot that we have got to do even as private sector to encourage each other to think deeper than we do now. Yes, it will be a knock but usually, when you are hit is when you rise up to come with alternatives from within,” he said.

Despite the gloomy picture, Reserve Bank of Malawi Governor Wilson Banda said in Times Exclusive the country will achieve its 3.4 percent projected growth.

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