Commodity price declines carry significant implications for terms of trade
Azerbaijan, Baku, Jan. 8/ Trend N. Ismaylova/ The decline of commodity prices anticipated for 2009 will drive sharp changes in developing countries' terms of trade, World Bank's Global Economic Prospects 2009 report says. Some 30 countries are expected to gain more than 1.5 percent of GDP from the decline in oil prices (figure 1.30). Of these, Cyprus, Guyana, Jamaica, Jordan, the Kyrgyz Republic, Moldova, Nicaragua, the Seychelles, and Tajikistan stand to gain more than 2.5 percent of GDP.
And the fall in food prices will help to ease both external and fiscal positions (as the cost of food subsidies declines) for many of the world's poorest countries, including Benin, Eritrea, Ghana, Guinea, Haiti, Madagascar, Niger, Senegal, and Togo. At the same time, oil-exporting countries will experience large terms of trade losses, with Angola, Azerbaijan, the Republic of Congo, Equatorial Guinea, Gabon, the Islamic Republic of Iran, Kuwait, Libya, Nigeria, and Saudi Arabia incurring first-round income losses in excess of 10 percent of GDP
Weaker metals prices are anticipated to reduce incomes by more than 2 percent of GDP in Chile, Mauritania, Mongolia, Papua New Guinea, Suriname, and Zimbabwe. Countries that rely heavily on grains exports are likely to be hit hard. Exporters like Argentina (maize, soybeans, wheat), Bolivia (soybeans), The Gambia (groundnuts), Guinea-Bissau (groundnuts), Guyana (rice), and Paraguay (soybeans) will experience losses ranging from 1.6 percent to 9 percent of GDP, though for some the impact will be softened by falling oil prices.
Taking into account the effects of commodity price declines on both import and export prices, more than half of the countries in a sample of 162 economies are expected to see an increase in the terms of trade, of which 24 will experience gains in excess of 1.5 percent of GDP. About a quarter of the countries, including most oil producers, are seen to incur first-round income losses in excess of 1.5 percent of GDP
Have any feedback? Contact our journalist at: [email protected]