Sluggish global economic growth and an abundant oil supply are expected to push commodity prices to their lowest levels in a decade, the World Bank said in a statement shared with PUNCH Online on Tuesday. The multilateral lender said the projected decline could help ease short-term inflationary pressures driven by rising trade barriers. However, it warned that the downturn may also undermine economic progress in two-thirds of developing countries, many of which are heavily reliant on commodity exports.
Citing its latest Commodity Markets Outlook, the bank said global commodity prices are projected to fall by 12 per cent in 2025 and an additional 5 per cent in 2026, dropping to levels last seen in 2020. In nominal terms, prices will remain above pre-pandemic levels.
When adjusted for inflation, however, prices are likely to fall below the 2015–2019 average for the first time, marking the end of a boom driven by the post-pandemic global recovery and Russia’s 2022 invasion of Ukraine.
World Bank Group’s Chief Economist and Senior Vice President for Development Economics, Indermit Gill, stated, “Higher commodity prices have been a boon for many developing economies, two-thirds of which are commodity exporters.“But we’re now seeing the highest price volatility in more than 50 years.
The combination of high price volatility and low prices spells trouble. Developing economies will need to take three steps to protect themselves: first, restore fiscal discipline; second, create a more business-friendly environment to attract private capital; and third, liberalize trade wherever the opportunity exists.”
The weakening global growth outlook is the latest in a series of shocks to hit commodity markets during what the bank described as an extraordinarily tumultuous decade. Commodity-price volatility has been higher than in any decade since at least the 1970s.
Whether this signals the start of a more turbulent era for commodity markets remains uncertain. But the confluence of trade tensions, conflicts, geopolitical risks, and more frequent climate-related disruptions increases the likelihood, the Bank said.
Commodity prices have been on a downward trend since 2023, helping to moderate global inflation. For instance, energy prices surged in 2022, adding more than two percentage points to global inflation, but their decline in 2023 and 2024 helped ease price pressures.
The World Bank expects this trend to continue, forecasting a 17 per cent drop in energy prices in 2025 to the lowest level in five years, followed by another 6 per cent decrease in 2026. Prices of Brent crude oil are projected to average $64 per barrel in 2025, a $17 drop from 2024 and decline further to $60 in 2026. Coal prices are also forecast to fall by 27 per cent this year and an additional 5 per cent in 2026 due to slowing demand for coal-fired power in developing countries.
“Commodity prices have whipsawed throughout the 2020s, plummeting with the arrival of the COVID-19 pandemic, then surging to record highs after Russia invades Ukraine, and then sinking again,” said the World Bank Group’s Deputy Chief Economist and Director of the Prospects Group.
“In an era of geopolitical tensions, surging demand for critical minerals, and more frequent natural disasters, that could become the new normal. Successfully navigating through repeated commodity price swings will require developing economies to build fiscal space, strengthen their institutions, and improve investment climates to facilitate job creation,” the World Bank added.
