Economy


WB expects broad commodity decline; oil to come off lows




Posted on January 27, 2016


WEAK GROWTH in emerging economies could further drag commodity prices this year, the World Bank (WB) said, revising its price forecasts for 37 out of 46 commodities monitored.

“All main commodity price indices are projected to decline in 2016 relative to last year due to persistently elevated supplies and, in the case of industrial commodities, weak growth prospects in emerging economies,” the multilateral lender said in its latest Commodity Markets Outlook published yesterday.

For instance, the WB expects energy prices to drop 25%, with oil prices now seen averaging $37 per barrel instead of the $52 per barrel forecast in October last year.

Oil prices, however, could recover gradually from current lows, as higher-cost producers cut production to narrow their losses and demand to strengthen amid a modest pickup in global growth.

The WB expects non-energy prices to decline slower at 3.7% this year. Agricultural prices, for one, could fall 1.4% or steeper than the 1.3% previously forecast partly due to adequate production despite the El Niño phenomenon.

The sharp decline in commodity prices over the past five years coincided with slowing growth in emerging and developing economies (EMDEs).

Commodity prices have dropped 40% since 2010, as growth in EMDEs slowed to 3.3% last year from the 7.1% seen six years ago.

“Although the decline in commodity prices has been mostly due to excess supply, weakening demand from commodity-importing EMDEs has also played a role,” the WB said.

In an earlier report, the WB cut its growth forecast for EMDEs for this year to 4%. The multilateral lender then partly attributed the revision to at the expected weakness in global trade.

The forecast for the Philippines, however, was retained at 6.4% and viewed among the fastest in East Asia and the Pacific on the back of improvements in government spending.

Finance Undersecretary and Chief Economist Gil S. Beltran also said earlier that Philippine imports will continue to increase to support the expected expansion of the economy.

Latest data from the Philippine Statistics Authority show the country’s merchandise imports grew 10.1% in November last year, overtaking the increase posted by 10 Asian peers.

Philippine exports, meanwhile, continued to contract during the month amid the weakness of the global economy. The decline, however, slowed to 2% from the 10.8% seen in October.

“Downside risks still dominate in this fragile global environment. Many of the factors underpinning the slowdown in recent years -- including low commodity prices, weak global trade, and slow productivity growth-are expected to persist,” the WB said. -- Keith Richard D. Mariano