Exposure to Global Commodity Trade and Market Disruptions: Impacts on Growth, Poverty, and Food Security in Malawi.

1. The Ukraine Crisis & African Economies - Exposure to Global Commodity Trade and
Market Disruptions: Impacts on Growth, Poverty, and Food Security in Malawi
Dr. Ismael FOFANA
Director, Capacity & Deployment
AKADEMIYA2063

2. Outline
1. Introduction
2. Analytical Framework
3. Simulation Scenarios
4. Results
5. Conclusion

3. 1. INTRODUCTION
- Global Commodity Price Shocks
The Russia-Ukraine war has driven up the international prices of global primary commodities
Projected Changes in Global Commodity Prices before and after onset of Ukraine Crisis (%)
-30
-10
10
30
50
70
90
110
130
150
Coal,
Australia
Crude
oil,
Brent
Natural
gas,
Europe
Natural
gas,
U.S.
Liquefied
natural
gas,
Japan
Cocoa
Coffee,
Arabica
Coffee,
Robusta
Tea,
average
Coconut
oil
Groundnut
oil
Palm
oil
Soybean
meal
Soybean
oil
Soybeans
Barley
Maize
Rice,
Thailand,
5%
Wheat,
U.S.,
HRW
Bananas,
U.S.
Meat,
beef
Meat,
chicken
Oranges
Shrimp
Sugar,
World
Logs,
Africa
Logs,
S.E.
Asia
Sawnwood,
S.E.
Asia
Cotton
A
Index
Rubber,
RSS3
Tobacco
DAP
Phosphate
rock
Potassium
chloride
TSP
Urea,
E.
Europe
Aluminum
Copper
Iron
ore
Lead
Nickel
Tin
Zinc
Gold
Silver
Platinum
Before Ukraine Crisis After onset of Ukraine Crisis
Source: World Bank, commodity markets outlook. Retrieved in April 2022

4. 1. INTRODUCTION (cont.)
- Country Exposure
International Prices of Top Export Commodities (Percentage Annual Changes)
Commodities
Share Total
Exports
Baseline Scenario Ukraine Scenario
2022 2023 2024 2022 2023 2024
Tea 9,2 -1,9 -1,9 1,4 -1,5 -3,8 1,2
Groundnuts 3,0 -4,9 2,6 0,8 12,2 -17,4 0,4
Soya beans 1,5 0,9 -6,0 0,9 20,1 -14,3 -0,7
Cane or beet sugar 9,2 -5,1 2,7 0,8 0,0 -2,6 0,0
Tobacco, unmanufactured 52,2 0,6 1,2 0,4 1,1 -2,4 0,4
-10
-5
0
5
10
15
20
25
2022 2023 2024
Export Price Indice
Import Price Indice
Commodities
Share Total
Imports
Baseline Scenario Ukraine Scenario
2022 2023 2024 2022 2023 2024
Petroleum, not crude 6,9 5,7 -12,2 0,6 42,0 -8,0 -13,0
Palm oil 2,1 -2,3 -2,3 0,4 45,9 -15,2 -2,0
Wheat and meslin 1,5 -2,0 -2,0 0,8 42,9 -15,6 -2,6
Tobacco, unmanufactured 3,6 0,6 1,2 0,4 1,1 -2,4 0,4
Fertilizers, nitrogenous 3,8 -1,3 -20,0 -8,3 76,0 -11,8 -20,0
Iron or non-alloy steel 1,5 -21,2 -7,7 -16,7 -13,6 -25,0 -14,3
International Prices of Top Import Commodities (Percentage Annual Changes)
Import and Export Price Indices,
Percentage Point Changes between
Ukraine and Baseline Scenarios
Terms of Trade are projected to deteriorate in 2022 and 2023

5. 2. ANALYTICAL FRAMEWORK
• Simulation models (Akademiya2063/ReSAKSS Toolbox)
 Single-Country CGE Models
• World Development Indicators database (World Bank)
 Macroeconomic data
• Africa Agricultural Trade Monitoring (A2063/IFPRI)
 Import and export data
• World Economic Outlook (International Monetary Funds)
 Economic Growth Outlook
• Primary commodity price database (World Bank)
 Annual price predictions for 46 primary commodities
(released in April and October)
Update the
Simulation
Models
Build the
Simulation
Scenarios
Simulation
Tools

6. 3. SIMULATION SCENARIOS
“Baseline” scenario
No major changes in the economies’ trajectories in the absence of the crisis
for the period 2022-2024.
 Economic Growth Outlook 2022-2024 (IMF, October 2021)
 Commodity Market Outlook 2022-2024 (World Bank, October 2021)
“Ukraine” scenario
Disruptions to the individual country economies resulting from the changes
in global commodity trade and markets
 Commodity Market Outlook 2022-2024 (World Bank, April 2022)
 Economic Growth Outlook 2022-2024

7. 4. RESULTS
- External Trade Effects
Limited capacity to respond to rising prices to boost exports
-15
-10
-5
0
5
2022 2023 2024
Exports Imports
Import and Export Volumes, Percentage Point Change between
Ukraine and Baseline Scenarios

8. 4. RESULTS (cont.)
- Economic Growth Effects
The sharp decline in 2022 put Malawi’s economy on a lower growth trajectory
-1
0
1
2
3
4
5
6
2022 2023 2024
Baseline Ukraine
GDP Percentage Annual Changes
9000.0
9500.0
10000.0
10500.0
11000.0
11500.0
2021 2022 2023 2024
Baseline Ukraine
GDP Level in Billion LCU

9. 4. RESULTS (cont.)
- Employment Effects
The sharp decline in 2022 put Malawi’s economy on a lower growth trajectory
Employment level, Percentage Annual Changes Employment Level in Million Individuals
3.0%
3.9% 3.7%
0.8%
2.6%
3.4%
2022 2023 2024
Baseline Ukraine
29.0
30.0
31.0
32.0
33.0
34.0
35.0
2021 2022 2023 2024
In
Million
Baseline Ukraine

10. 4. RESULTS (cont.)
- Poverty Effects
The Russia-Ukraine war likely to reduce the poverty reduction effort of Malawi
Change in Headcount Poverty Index Compared to Baseline (Percent)

11. 4. RESULTS (cont.)
- Food Security Effects
Deterioration in the food security situation, worse among rural than urban households
2022 2023 2024
All Food All Food All Food
All 2.4 2.2 2.9 1.8 1.8 2.1
Rural 2.9 2.5 3.2 2.1 2.3 2.3
Urban 1.8 1.7 2.4 1.3 1.2 1.6
Percentage Change in Consumer Price Index, vs Baseline
Percentage Change in Household Income, vs Baseline
2022 2023 2024
All -4.5 -5.3 -5.6
Rural -4.8 -6.3 -7.3
Urban -4.1 -4.2 -3.6
2022 2023 2024
All Food All Food All Food
All -5.2 -3.9 -6.6 -4.5 -6.6 -5.4
Rural -5.7 -4.3 2.4 -5.3 1.2 -6.6
Urban -4.5 -3.0 -5.2 -3.0 -4.1 -2.9
Percentage Household Consumption, Baseline

12. 5. CONCLUSION
Projected Changes in Global Commodity Prices before and after onset of Ukraine Crisis (pp),
Comparing April and October 2022 Predictions
Mixed picture in the evolution of global commodity prices
-40
-20
0
20
40
60
80
100
120
140
160
Coal,
Australia
Crude
oil,
Brent
Natural
gas,
Europe
Natural
gas,
U.S.
Liquefied
natural
gas,
Japan
Cocoa
Coffee,
Arabica
Coffee,
Robusta
Tea,
average
Coconut
oil
Groundnut
oil
Palm
oil
Soybean
meal
Soybean
oil
Soybeans
Barley
Maize
Rice,
Thailand,
5%
Wheat,
U.S.,
HRW
Bananas,
U.S.
Meat,
beef
Meat,
chicken
Oranges
Shrimp
Sugar,
World
Logs,
Africa
Logs,
S.E.
Asia
Sawnwood,
S.E.
Asia
Cotton
A
Index
Rubber,
RSS3
Tobacco
DAP
Phosphate
rock
Potassium
chloride
TSP
Urea,
E.
Europe
Aluminum
Copper
Iron
ore
Lead
Nickel
Tin
Zinc
Gold
Silver
Platinum
All Commodities 27|27. Energy 69|92. Agriculture & Food 18|22. Agriculture raw materiel 26|-17. Fertilizer 71|77. Minerals 14|-1.

13. 5. CONCLUSION (Cont.)
Commodities
Share
Total
Exports
April 2022 Forecasts October 2022 Forecasts
2022 2023 2024 2022 2023 2024
Tea 9.2 -1.5 -3.8 1.2 15.2 -9.7 0.7
Groundnuts 3.0 12.2 -17.4 0.4 31.6 -4.5 -0.4
Soya beans 1.5 20.1 -14.3 -0.7 14.3 -1.8 -0.2
Cane or beet sugar 9.2 0.0 -2.6 0.0 2.6 -5.0 0.0
Tobacco, unmanufactured 52.2 1.1 -2.4 0.4 1.1 -2.4 0.4
Commodities
Share
Total
Imports
April 2022 Forecasts October 2022 Forecasts
2022 2023 2024 2022 2023 2024
Petroleum, not crude 6.9 42.0 -8.0 -13.0 42.0 -8.0 -13.0
Palm oil 2.1 45.9 -15.2 -2.0 12.7 -17.6 0.4
Wheat and meslin 1.5 42.9 -15.6 -2.6 36.5 -4.7 -1.2
Tobacco, unmanufactured 3.6 1.1 -2.4 0.4 1.1 -2.4 0.4
Fertilizers, nitrogenous 3.8 76.0 -11.8 -20.0 49.1 -9.7 -7.7
Iron or non-alloy steel 1.5 -13.6 -25.0 -14.3 -25.9 -16.7 -2.0
Changing Pressure on Terms of Trade Deterioration
2.1%
-4.3%
-0.2%
37.4%
-1.4%
-7.5%
2022 2023 2024
April 2022 Forecasts
Export Import
5.1%
-4.6%
-0.3%
27.1%
0.3%
-3.8%
2022 2023 2024
October 2022 Forecasts
Export Import
Evolution of Global Prices for Top Exported Commodities
Evolution of Global Prices for Top Imported Commodities

14. THANK YOU