Thursday, October 28, 2021

World Bank hopeful of upbeat commodity market

The World Bank is forecasting strong gains for industrial commodities such as energy and metals in 2017 which it attributes to tightening supply and strengthening demand. 

Information contained in the World Bank January 2017 Commodity Markets Outlook is holding steady its crude oil price forecast for the year at $55 per barrel, a 29 percent jump from 2016. The energy price forecast assumes members of the Organization of the Petroleum Exporting Countries (OPEC) and other oil producers will partially comply with an agreement to limit production after a long period of unrestrained output. 

The Bank foresees an increase of 11 percent in the metal prices from the four percent that had been forecasted in its October outlook. The positive rise is expected from further tightening of supply and strong demand from China and advanced economies. Senior Economist and lead Author of the Commodity Markets Outlook, John Baffes said prices for most commodities appear to have bottomed out last year and are on track to climb in 2017. He added however that changes in policies could alter this path. 

Drawing the focus to Botswana Local Economist Dr Keith Jefferis said in an earlier interview that he was not very optimistic about economic prospects for Botswana in 2017 following a turbulent 2016 which saw massive job losses and closure of some businesses. Although some of the causes were difficult trading conditions locally, another reason had been heavy reliance on commodities which rendered the country vulnerable to international market fluctuations. He said that prolonged uncertainty in global markets and the slow pace of economic recovery in advanced economies continued to act as a drag on Botswana’s economic outlook which was particularly evident in recent years.

Dr Jefferis had said that business confidence remained low in Botswana because of certain government policies which made it difficult for the private sector to thrive. He cited the example of a recent refusal to grant operating licenses to South African chain stores. “There may be some recovery in commodity prices, which continue to be subdued, that may help boost the economy but that should not translate to mean all will be rosy. Otherwise many of the other factors that led to lack of confidence in private sector will continue and such confidence will remain low,” he had said.

The World Bank made an observation to that regard that a special focus shows how commodity-exporting emerging and developing economies have been hit hard by slowing investment growth, which has declined from 7.1 percent in 2010 to 1.6 percent in 2015. “Investment weakness both public and private hinders a range of activity in commodity-exporting emerging market and developing economies,” said Ayhan Kose, Director of the World Bank’s Development Prospects Group. “Most of these economies have limited policy space to counteract the slowdown in investment growth, so they need to employ measures to enhance the business environment, promote economic diversification, and improve governance to better growth prospects over the longer term,” said the World Bank.

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