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Soaring energy prices pose inflation risks, supply constraints persist -- WB

WASHINGTON, Oct 21 (KUNA) -- The World Bank Group said Thursday the energy prices soared in the third quarter of 2021 and are unlikely to decline in 2022.
The soaring prices add to global inflationary pressures and potentially shifting economic growth to energy-exporting countries from energy-importing ones, according to the WB's latest Commodity Markets Outlook.
The report forecasts that energy prices - expected to average more than 80 percent higher in 2021 compared to last year - will remain at high levels in 2022 but will start to decline in the second half of the year as supply constraints ease. Non-energy prices, including agriculture and metals, are projected to decrease in 2022, following strong gains this year, the report cautioned.
"The surge in energy prices poses significant near-term risks to global inflation and, if sustained, could also weigh on growth in energy-importing countries," said Ayhan Kose, chief economist and director of the WB's Prospects Group, which produces the Outlook report. "The sharp rebound in commodity prices is turning out to be more pronounced than previously projected. Recent volatility in prices may complicate policy choices as countries recover from last year's global recession," Kose pointed out.
Crude oil prices are expected to average USD 70 in 2021, an increase of 70 percent. They are projected to be USD 74 a barrel in 2022 as oil demand strengthens and reaches pre-pandemic levels.
The use of crude oil as a substitute for natural gas presents a major upside risk to the demand outlook, although higher energy prices may start to weigh on global growth.
As global growth softens and supply disruptions are resolved, metal prices are forecast to fall 5 percent in 2022, after rising by an estimated 48 percent in 2021. Following a projected 22 percent increase in 2021, agricultural prices are expected to decline modestly next year as supply conditions improve and energy prices stabilize.
The report notes that forecasts are subject to substantial risks-including adverse weather, the uneven COVID-19 recovery, the threat of more outbreaks, supply-chain disruptions, and environmental policies.
Furthermore, higher food prices, along with the recent spike in energy costs, are pushing food-price inflation up and raising food-security concerns in several developing economies, it added. (end) rsr.gb