The World Bank has sounded the alarm over falling global commodity prices, forecasting a steep 12% decline in 2025 followed by another 5% in 2026, levels not seen since before the pandemic. The downturn is largely driven by slowing global growth and an oversupply of oil. In real terms, prices are expected to fall below the 2015–2019 average, signaling the end of the short-lived commodity boom that followed COVID-19 and Russia’s invasion of Ukraine. While the drop could help ease inflation for importers, the outlook raises red flags for export-reliant developing countries.
In a detailed outlook, the Bank warns that two-thirds of developing economies could suffer from the ongoing slump, particularly those dependent on oil, metals, or food exports. Chief Economist Indermit Gill highlighted the highest price volatility in over 50 years, adding that this instability, coupled with declining revenues, could severely hamper growth. To stay afloat, the Bank recommends fiscal discipline, a friendlier business environment, and trade liberalization where possible.
The energy sector, once a driver of inflation, is now leading the price drop. Brent crude is forecast to fall to $64 per barrel in 2025 and $60 in 2026, while coal prices could plunge 27% this year alone. A major factor is the rising popularity of electric vehicles, especially in China where EVs and hybrids now make up over 40% of new car sales. With global oil supply set to exceed demand by nearly a million barrels per day, energy-exporting nations may face tough adjustments ahead.
Meanwhile, food prices are also projected to decline—down 7% in 2025 and 1% in 2026. But that doesn’t mean the hunger crisis is over. According to the UN, over 170 million people across 22 countries are still facing acute food insecurity this year. The World Bank points out that while falling food prices might ease pressure on aid agencies, they don’t address deeper issues like conflict and climate disruptions that keep driving hunger.
Gold stands out in the report as a rare bright spot, with prices expected to hit record highs in 2025 amid global uncertainty and rising investor anxiety. In contrast, industrial metals are projected to decline due to weak global demand and ongoing real estate troubles in China. Deputy Chief Economist Ayhan Kose warned that such extreme swings may become the new norm, urging developing countries to build resilience through stronger institutions and better fiscal planning.
Source: Nairametrics