The eruption of the worldwide financial crisis has radically recast prospects for the world economy. Global Economic Prospects 2009: Commodities at the Crossroads analyzes the implications of the crisis for low- and middle-income countries, including an in-depth look at long-term prospects for global commodity markets and the policies of both commodity producing and consuming nations.

Developing countries face sharply higher borrowing costs and reduced access to capital. This will cut into their capacity to finance investment spending— ending a five-year stretch of developing-country growth in excess of 6 percent annually. The looming recession presents new risks, coming as it does on the heels of the recent food and fuel crisis.

Commodity markets, meanwhile, are at a crossroads. Following decades of low prices and weak investment in supply capacity, commodity prices first spiked— spurred on by five years of very fast developing-country growth—and have now plummeted in response to the financial crisis.

In the longer run, commodities are not expected to be in short supply. Prices should be higher than they were in the 1990s but much lower than in the recent past. These higher prices should provide producers with sufficient incentive to discover new supplies, improve output from existing resources, and promote greater conservation and substitution with more abundant alternatives. At the same time, slower population growth will ease the pace at which commodity demand grows. Policies to limit carbon emissions and boost agricultural investment, along with the dissemination of efficient techniques, should also contribute to this long-term outcome.

This year’s Global Economic Prospects also looks at government responses to the recent price boom. Producing-country governments have saved more of their windfall revenues, and are therefore less likely to be forced to cut into spending now that prices have declined. The spike in food prices tipped more people into poverty, which led governments to expand social assistance programs. These programs need to be better targeted to the needs of the very poor so that governments can respond effectively the next time there is a crisis.

For additional information, please visit www.worldbank.org/prospects.

An online companion to the prospects section of this report, including access to additional data and analysis not reported here, is also available at www.worldbank.org/globaloutlook.

“While developing countries entered this tumultuous period with much improved fundamentals, this crisis is expected to test severely both them and the international financial system. In the longer run, even after developingcountry growth recovers, commodity supply should keep pace with demand, but policy will need to foster conservation efforts and technological progress. In particular, if poor countries are to maintain domestic food self-sufficiency, governments will need to strengthen investment in rural infrastructure, agricultural research, and technological outreach.”

—Justin Yifu Lin
Senior Vice President and Chief Economist, The World Bank

Visit Global Economic Prospects 2009: Commodities at the Crossroads Download Page

You can download full publication in PDF format.

Paperback: 180 pages
Publisher: World Bank Publications (December 4, 2008)
Language: English
ISBN-10: 082137799X
ISBN-13: 978-0821377994

CONTENTS
Foreword xi
Acknowledgments xiii
Abbreviations xv
Overview 1
Chapter 1 Prospects for the Global Economy 15
Financial markets 19
Outlook for high-income OECD countries 24
Outlook for the developing countries 27
World Trade 36
Commodity markets 39
Key risks and uncertainties 45
Long-term prospects and poverty forecast 46
Chapter 2 The Commodity Boom: Longer-Term Prospects 51
Characteristics of the current commodity price boom 53
The roots of the boom in commodity prices 57
Long-term demand prospects 64
Long-term supply prospects 74
Projections 85
Conclusions 89
Chapter 3 Dealing with Changing Commodity Prices 95
Commodity dependence and growth 98
Managing primary commodity booms 102
Poverty impacts of higher commodity prices 113
Dealing with high food and fuel prices 121
The international response to high commodity prices 127
Conclusions 131
Technical Annex: Sensitivity Analysis 132

OVERVIEW
The release of this year’s Global Economic Prospects finds the world economy at a crossroads. Markets all over the world are engulfed in a global economic crisis, with stock markets sharply down and volatile, almost all currencies having depreciated substantially against the dollar, and risk premiums on a wide range of debt having increased by 600 or more basis points. Commodity markets too have turned a corner. Following several years of increase, prices have plummeted, and although well above their 1990s levels, they have given up most of the increases of the past 24 months.

Chapter 1 of this report examines the medium-term implications of this crisis for developing-country growth, inflation, and world trade. Chapter 2 looks at longer-term supply and demand prospects in commodity markets. It takes into account the long-term growth prospects of developing countries and their rising share in world GDP (gross domestic product), the declining quality of new pools of resources, and the influence of technology on both demand and supply.

Finally, chapter 3 reports on the poverty impacts of high commodity prices and examines the effectiveness of policies in both producing and consuming countries in dealing with the challenges posed by periodic bouts of high commodity prices.

This report does not deal with water, fish, or timber, all commodities of critical importance to developing countries and the globe but which fall outside the scope of this report either because of their public-goods character or, in the case of timber, because of its treatment in a recent report (World Bank 2007). ...

Comments (1)

Name

Email

Comment

smaller | bigger

Add Comment